Friday, February 5, 2010

More on the new house

A Blog Frog participant posted the following; thought readers would like to see it before it gets deleted:

Evening Ladies,

While I have not read thru each page, I did read the initial question concerning whether or not Jennifer and Israel were unknowingly the victims of a "scam." They were not.

I have knowledge of the transaction that led to them being in their current space. Without going into too many details, I can tell you that the builder of the home, Lane Custom Homes, originally had the home listed for around $670K (it was the model home in the development, and actually could have gone for closer to $1 million had the economic conditions been right as it sits less than 1/2 mile from an 18-hole golf course that is lovely). Unfortunately, it became harder and harder to sell as most people in the area who would have purchased the home as a "move-up" home, were having trouble selling the less expensive ones they were already in, moving up! After being on the market for a while, the house went back to the bank -- this is the "owner" listed on the tax/court records.

Since there was a significant credit risk -- with I believe two foreclosures, etc. -- and qualifying for any kind of bank financing was out of the question, the choice was instead made to leave the previous residence (that was in foreclosure) during what's called the "Redemption Period," after discontinuing all payments due to their mortgage lender at the time, and put that money towards a (I believe) 0% or 3% downpayment on the current house in what is called in the real estate market "Deed for Contract" agreement with the owner (which is the bank in this particular case). In this agreement, they pay an amount each month to the owner (who holds the deed) just as you would if you had a mortgage, along with all taxes, and they live in the house as if it's theirs. They also commit to get lending for a traditional mortgage down the road at an agreed upon time when they qualify and can afford it. The only catch is, if they reach a point where they can no longer afford the payment to the owner, they lose all money paid up to that point (b/c there would be a lawsuit filed) and have to vacate the property unless of course they can come up with the monthly payment. If I recall, they paid around $400K (give or take) for the house, which resulted in a significant loss to the bank. The builder already had lost big earlier on in the process. When the house is paid up to the agreed upon amount, and they have secured proper financing down the road for the remainder, thereby fulfilling their contract to the owner, they/mortgage holder will then be given the deed to the house.

This type of creative financing, as you can imagine, is very controversial, but widely done in certain situations. As someone who works in the industry, it's always sad to see grown adults make the decision to walk away from one property and not fulfill their obligation. Unfortunately, this type of behavior is what got the housing situation in the mess that it is in today. Neighbors have to contend with plummeting property values around those houses that are left standing empty/foreclosed on, and it's not right. It affects everyone.

Hopefully I was able to clear some things up for all of you. I don't look down on the family for doing what they did, but it is a very sad and unfortunate situation that I'm sure has had devastating effects on many people. Credit such as this is not something easily fixed, for it takes years to get it to this point in the first place. I do hope one or both of them is able and blessed to land a job that is both secure and rewarding so that they can begin to repair the damages that have been left in their wake, as well as be able to provide for their growing family with a clean conscience.

Goodnight. And Happy Friday all!