Sammy’s Story, Part 4

October 30, 2013 By 3 Comments

If you haven’t been following along with Sammy’s story, please take a few minutes to do so here, here, and here.

Photo of underside of electric lawn mover

Photo of underside of electric lawn mover (Photo credit: Wikipedia)

We left off in September, with the yard done and the house almost ready to rent. Sammy and his guys worked their butts off getting the work done. It cost more than we had expected, but it got done.

Over the winter, we hired the crew to handle the snow at both of our properties. We paid Sammy a flat fee and he made sure the driveways and sidewalks were clear every time it snowed. We started paying him in November, and ran through until March, so he got a pretty good deal and we didn’t have to worry about the snow.

When spring came, Sammy told me he needed to take a break from his business. Putting a yard care business on hold when spring hits is a bad idea, but it happened. He was dealing with some problems with his housing and couldn’t focus on anything else, even though the money would have helped him a lot.

When he lost his apartment, we let him store some of his things in the extra garage stall at the rental. This stall was reserved in the lease for us to use, and was the base of operations for the yard care business, since he was using our lawn mower and snow blower anyway.

And that was the last we saw of him for a month.

When we started nagging him to take care of his stuff, he kept telling us that he wanted to keep his business going, but he couldn’t, yet.

Then he’d leave his stuff for another month.

By the end of the summer, he’d gotten most of his stuff out and we’d only hear from him if he thought he could borrow money from us, which didn’t happen.

Finally, my wife called him and told him to get his crap out by the end of September.

Or else.

A week into October, we found out that he’d spent September in jail. Supposedly, he broke up with his(literal) crackhead girlfriend and she called the police and made up stories. He got arrested and couldn’t make bail.

Last week, he came to borrow our trailer to get the last of his stuff out, then returned it in the evening without moving any of his stuff. He said he was moving the stuff he had stored elsewhere and he’d be back on Monday.

Monday? Nothing.

Our relationship with Sammy has gone from helping him launch a business that helps fatherless teens, recovering crackheads, and the homeless to lies and getting begged for money.

My wife is ready to put his stuff on the curb.

What would you do? Toss his stuff? Give him another chance?

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3 comments

The Evils of a Reverse Mortgage

October 3, 2012 By 5 Comments
Fritos Logo

Image via Wikipedia

Picture it: Sicily, 1922.

Sorry, wrong channel. Let’s try again.

Picture it: 20, 30, 50 years from now. You’re old. The money you’ve been failing to save so you could stock up on Fritos and obsolete video game consoles(to survive the zombie apocalypse in style) would come in handy about now, since the end of the world never happened. Note to self: Never trust an ancient Mayan.

You’re 70, with no savings and no income aside from the Social Security check that hasn’t been adjusted for inflation since the Palin(Bristol) administration.

But you own your house and that nice young man down at Yersk Rude Bank recommended a reverse mortgage. That could give you all of the money you need to live a comfortable retirement and pay for a bit of a funeral.

Right?

Nazzofast.

Of all of the possible social security strategies, this is one of the worst.

What is a reverse mortgage?

In a traditional mortgage, you’re given a chunk of money guaranteed by your home. You have to pay that money back over time, or you’ll lose your house. In a reverse mortgage, you’re still converting your home’s equity into cash, but you don’t have to pay it back until you die or move, including moving into a nursing home. You are effectively abandoning future-house in exchange for now-money.

Who qualifies for a reverse mortgage?

If you are 62 or older, and live in a home you own, you qualify. Credit and income are not considered.

Why would you want a reverse mortgage?

If money is tight and you have no prospects, a reverse mortgage may be a valid consideration. A better consideration would be to take out a traditional loan and make monthly payments out of that lump sum, or sell your house outright and move someplace more affordable.

What are the downsides of a reverse mortgage?

You lose your house. Technically, your heirs lose your house. A reverse mortgage becomes due when you die. If your heirs can’t cover the loan, the house will be foreclosed. Also, this is a loan. It accumulates interest, even if you aren’t paying it back. If you borrow $200,000 and die in 10 years, your estate may owe $400,000 on the reverse mortgage. If this is a treasured family home, losing it could come as a shocking blow at a time when your family would already be reeling from the loss of, well, you.

What if you really don’t like your heirs?

I’d still recommend getting a traditional mortgage. You can throw a killer party and then, you’ll rebuild equity over time. That way, if you live longer than you expect, you can refinance and throw another killer party. If you go this route, don’t invite the kids, but be sure to hire a videographer so they can see how you’re spending their inheritance.

I’m not a banker or a financial advisor, but I’d recommend against a reverse mortgage in almost all circumstances.

How about you? Would you get one, or recommend one? What’s your preferred method to hurt your ungrateful heirs?

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5 comments

Kids Are Temporary

September 21, 2012 By 3 Comments

Have you ever watched someone go nuts after they have kids?

I mean, even after the I-haven’t-slept-more-than-20-minutes-in-a-row-for-3-months stage of babydom?

These people dedicate their lives to their kids. They sacrifice all of their hopes and dreams and focus on the brats. They can’t have a date night because little Sally might get lonely without mommy and daddy. Can’t have a hobby because Johnny’s on the traveling soccer team. Can’t get laid because it’s a family bed and that’s kind of creepy when the kids are right there.

Everything for the kids.

As they grow, it gets worse. You spend more time helping with homework and less time talking to your wife. More time playing chauffeur, less time playing doctor.

It’s a nasty cycle, and it comes with an abrupt stop.

What happens when school’s out? Little Johnny graduates with a dual degree in Practical Philosophy and Experimental Art History, gets a job at the local Stab-and-Grab, gets married, and starts a family.

When that happens, parents suddenly become “extended family”. The kid has a life of his own and probably doesn’t need his clothes picked out in the morning, a ride to soccer practice, or someone to write his name in his underwear.

This is planned. It is-in theory-the reason we raise our kids. It shouldn’t be a surprise, even if it is a bit of a shock.

Can you survive it? Can your marriage?

If you’ve spent the last 20 years of your life pretending you are nothing but a system for delivering food, rides, and gadgets for your kids, what are you going to do with your time when they are busy pretending they are that system for their kids? If you’ve never developed a hobby, are you going to go extra-special, bat-**** crazy now?

For 20 years, have all of your conversations been about your kids? Have all of your outings been birthday parties? Will you have anything to say to your spouse when the kids are gone?

Your kids are temporary.

They are important. They are your genetic legacy and the people who will choose your nursing home. Don’t neglect them, but you do have to hold something back. Make time for yourself. Make time for your husband or your wife. Or both, if you can make that work.

When your kids are working 90 hour weeks building a new career, or hustling 4 kids to 10 after-school activities, your life doesn’t get to revolve around them.

All you’ve got is yourself and your wife. If she’s not feeling secure about your feelings now, when she loses the distraction of puke in her hair, that insecurity will blossom in unpleasant ways. If you can’t find a conversation that doesn’t involve the kids now, the silence will be blistering when you eventually lose that crutch.

If you don’t have a hobby, get one.

If you don’t have a relationship with your wife, get one. Take her on a date tonight. Your kids are temporary, your marriage shouldn’t be. This is the rest of your life. Make it worthwhile.

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3 comments

Refinancing Through the HARP Program

June 26, 2012 By Leave a Comment

HARP Refinance

If you owe more than your house is worth, and want to refinance to today’s low interest rates, you need to check out the HARP program. Millions of homeowners with underwater homes are finding relief in a new version of the Home Affordable Refinance Program (HARP). Refinancing to lower interest rates could slash your monthly mortgage payment or shorten the time it takes to pay-off your mortgage.

The new HARP loosened qualification rules, making it it easier for underwater homeowners to qualify for a refinance. When HARP 2.0 was released in November 2011 you had to work with your original lender. Since March 2012, when Fannie Mae and Freddie Mac rolled out the automated underwriting systems, you can work with any participating HARP lender. That means more competition for your business and better rates for you

HARP 2.0′s Hurdles

There are two series of hurdles you must clear before you can refinance your loan under HARP 2.0. The first set of hurdles concerns the loan itself. The three key eligibility questions are:

  1. Is the loan owned by Fannie Mae or Freddie Mac?
  2. If so, was the loan purchased by Fannie or Freddie on or before May 31, 2009?
  3. The loan was not refinanced under HARP before (some exceptions apply).

If you answer yes to these three questions, then your loan may be eligible for HARP.

Tip: If your loan is a FHA loan, then check out a FHA streamline refinance loan.

The second set of hurdles concerns your finances and property. Fannie Mae and Freddie Mac set up the basic guidelines. There are two basic ways your loan can be processed:

  1. Manual Underwriting System: Only your original lender (who is also your current servicer) can process a HARP loan through the manual underwriting system.
  2. Automated Underwriting System: Any participating lender can process a HARP loan through the automated system.

Keep in mind that lenders are free to have stricter qualifying rules than the basic Fannie and Freddie requirements.

When shopping for a HARP loan, here are some of the main points to look out for:

  • Credit Score Requirements: Fannie and Freddie have no minimum FICO score requirements. However, each lender has its own credit score requirements, so if you are denied by one lender, keep shopping.
  • Income Requirements: Your original lender can approve a loan with no debt to income ratio (DTI) requirement. However other lenders must qualify you based on your DTI. The rule-of-thumb for a HARP loan is a 45% maximum DTI.
  • Timely Mortgage Payments: The HARP program allows for no late mortgage payments in the last 6 months and one late (30 days) payment in the preceding 6 months. However, some lenders do not allow any late payments.
  • Investment Properties Qualify: You can refinance a second home or rental property under HARP 2.0.
  • Fees: Lenders are not consistent in the fees or the interest rates they charge for HARP 2.0 loans. Some lenders charge a few hundred dollars for HARP 2.0 loan fees, and others charge thousands. It pays to shop around, so you can compare interest rates and fees.
  • Condos: While HARP guidelines for condos are tricky, many more condo owners will qualify for a loan under HARP 2.0 than under the first version of HARP.

Applying for HARP
First, go to the Fannie Mae and Freddie Mac Web sites to learn if either owns your loan and whether they bought your loan on or before May 31, 2009. If so, you can contact either your current mortgage servicer or shop around with the many lenders who are offering the HARP 2.0 loan.

If your application is rejected, ask for the specific reason why. If you applied with your original lender, find out whether the lender used the manual or automated system. Request manual underwriting if your original lender turned you down based on automated underwriting, as it may result in your loan being approved.

It pays to shop for HARP 2.0 refinance. Many homeowners report one lender will reject their application, but another will offer them an attractive refinance. Second, lenders are not consistent in their offers. As mentioned, closing costs are all over the map. Interest rates vary, too.

Summary
HARP 2.0’s rules are technical. Each lender creates different overlays. If you believe you qualify for HARP 2.0, be persistent! The rules that are in place today could very well be expanded in the future. This is one instance in life where shopping can be the solution to your problem.

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