How Someone's Payments Can Double

Yesterday I went to Parchment (just north of Kalamazoo) and spoke with a family who's payment almost doubled within a few months. Here's how that can happen (and it may happen to you).

1) Lender losses insurance information and thinks there's no insurance on the house.
2) Insurance agent sends proof of insurnace, but never follows-up to be sure lender got it.
3) Lender puts a $1000/yr policy on the house, and charges the home owner (double what they usually pay).
4) Lender then forces the creation of an escrow account, and expects the owners to fund it (with about $2500); plus they want the $1K for the policy they just bought.
5) $210 Escrow is added to payment (to pay future taxes and insurance)
6) $290 Escrow shortage "make-up" is added to payment (to pay the $3500 from 3 & 4 above).
7) The mortgage is variable rate, so it goes up $100.

There you have it - $600 to $1200 almost overnight, through no fault of this family.

Obviously, if you're used to a $600 payment and it goes to $1,200, you're not going to be able to keep up - neither could they. That's why they've asked me to come in, stop the foreclosure and purchase their home. I'll have to discount the debt first since they owe more than it's worth, but hey, that's what I do (call me the "Bank Bully" if you have to). The end result will be to allow this family to start over and start rebuilding their credit, while getting them out from this ridiculous house payment.

Don't thing this is rare - I see it often.

Until Monday - Joel Zieve