Well, the Koch family has found themselves in quite a jam.
We refinanced in order to do the kitchen remodel and fix up the basement. We found this mortgage/finance management company that does "wraparound/slider" mortgages. I'd never heard of them before, but essentially what they do is:
Appraise your home
Find out the maximum amount you're eligible to finance
Offer you a fantastic interest rate on the amount of money you actually need, if you'll agree to finance more money than you need, and they get to invest that extra money and make interest on it.
For example, if you want to finance $200,000, but qualify for $300,000....you finance $300000, then have a closing. Three days later you have a second closing saying that this company is responsible for $100,000, you're responsible for $200,000, and you pay them the payment on your $200,000, and they pay the original mortgage payment on the $300,000. Sound confusing? It did to me at first, but then it made sense. They make money on your $100,000, so they can give you a great interest rate on your $200,000.
So, of course, we went for it. The company has been in business for over 25 years, had a good standing with the BBB and references out the wazoo.
We got a letter from the mortgage/finance company yesterday saying that due to poor investments on their part, they're filing for bankrutcy. And, that they haven't made payments for the past two months, and that we're responsible for the entire payments.
We're screwed.
Keith's a mess, and of course, he couldn't wait to tell me when we were alone, he said it in front of the kids, who are now a wreck. What a jerk he was to blurt it out in front of them, "Schell, we're in trouble and I think we're going to lose the house!" I keep reassuring them that we'll work everything out, and they shouldn't worry, but you know how that goes.
If we can't do anything legally about all this, we're going to have to come up with an additional $700 a month for a mortgage payment, and be out around $90,000. Of course, we have all kinds of documentation, but if the company is bankrupt, I don't know what good that will do us. I called the mortgage company that thinks we owe them the higher payment, and explained the situation. I have to fax them all the documents that I have, then they will call me in a few days to see what they decide. Also, we have 60 days for some sort of decision to be made before anything will be reported to the credit bureau, so our credit rating will not be changed...yet.
I don't know what else we can do. There's a lot of smart people who come to this site, so I'm hoping someone has some advice for us.
15 comments:
all I got for you is sympathy ... I would serve you tea if I were there, but from here only loads and loads of shock and sympathy
i would call a lawyer and get some legal advise from them. best of luck to you. :(
I don't have anything at all nice to say about getting yourselves in this bind, so I shan't say anything at all.
Wishing you lots of peaceful nights. I'm sure the bank will come up trumps.
If you do lose the hosue schell its not the end of the world Take my word for it having been through it myself . Its funny but the worrying about it is actually far worse than the actual event.
I think the attorney idea is best, one who specializes in real estate law. And I'm sorry and sad for you. Keith shouldn't have said anything in front of the boys, but he's probably so scared he didn't know what to do. Now's the time you and he are both going to need to tap into your deepest reserves of kindness for each other.
Res-I'll tell you what I tell my kids when they say that....you just did say something not nice.
I've filed a claim with the Atty Gen for the state, and with the PABanking number. They have received over 800 phone calls so far for this. They have 10 full time employees delegated for just this company.
sounds like it has happened to many people. that is probably in your favor and somehow it will all work out.
It sounds like you've starting doing all that needs doing, but I'll third the going to a real estate lawyer. While Keith probably shouldn't have said that in front of the kids, what's done is done, and at least, they won't be weirded out from picking up yours and his stress levels because you know that they would have.
Schell,
I have some Good News/Bad News. You and the kids can come and live in our basement, but Keith can't.
Schell..if Keith brought chocolate, he could come and live in my basement if I had one.
So I'm guessing the company is telling you that they "lost" the $100,000 you gave to them. But it's doubtful they lost it all. If the people involved don't want to go to jail, they should come up with some money for you and all the other people who gave them the 'extra' finance money. Common sense says that they should be able to give you back $50,000 of the original $300,000 you borrowed.
But the odds are they aren't, and will be able to show you where the money went: they probably 'kited' the money back around to pay off interest on other accounts and of course there were their expenses...
The only silver lining I can see right now is that you have a $100,000 casualty loss that will offset you taxes next year.
Forget the real estate attorney. Find one of those class action attorneys and sue the corporate officers as officers and private citizens. That will get their insurance companies, the ones who sold E&O coverage and CPL coverages to the corporate officers, either through the company or their personal insurances. They went over 60 days without telling you of their problems; that's a total abuse of their fiduciary duty to you. You may not get your own money back, but you should get their insurance carriers' money. Getting some kind of court action going should help stall your $300,000 lender from doing anything drastic, so long as you keep making the payments on the $200,000 you were responsible for.
I wish I had something new to contribute but, I don't. I'll keep my fingers crossed.
i like bert's idea because it might work and it'll get you some money while giving you someone to vent to.
my uncle had an issue like this several years ago, maybe 15ish. the company screwed over half the east coast and in the end, he only got $10,000, which was beans after late fees and legal fees. he lost his house and had to declare bankruptcy. i think he was on dateline for it.
you know, you could call your buddy back at the senator's office. he's probably getting a lot of calls from people in yours bind and might have a resource page set up. i have a feeling this will become a good debate issue for the election.
i think keith made a poor choice to tell you in front of the kids, but he probably wasn't thinking straight. i'd let you come live on the top floor of my house, but you'd have to paint the whole house in trade : )
jilly
Hey , maybe Schell will be on Dateline! How cool is that?
I find it hard to believe YOUR lawyer at the closing allowed you to sign papers that would make YOU responsible for the added 100 grand if something went wrong with the company you borrowed the money from which is exactly what happened .
I think you should first contact your original closing lawyer and see what the deal is with that . Also you may want to look into whether or not YOUR lawyer might have some culpibility in the matter .
I would guess Bert would know more about class action suits then me but from my reading about various class action suits in the past my take is the only people who make money off them are the lawyers who bring them .
As I said I might be wrong on that but that has been my understanding .
Anyway Schell. Best of luck with this whole mess .
Allan
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