The situation
We bought a condo in 2005 at the height of the housing boom for $308,000. Our loan was financed by Wells Fargo, and the type of loan that we qualified for consisted of an 80%/20%, hence it was 100% financed. Both loans were called Smartfit Home Equity accounts and were fixed Interest Only for the first 3 yrs . We were ofcourse told by the loan officer that we should be able to refinance by or before the 3 yrs and get into a regular fixed loan.
Forward 2 yrs later and with the bust of the economy, deep decline in housing values, and unemployment, we are just one number among the millions of people facing default on their mortgage loan.
One of us lost our job last year in 9/2007, and that is when we started contacting Wells Fargo trying to be proactive with our situation because we knew in 2008 the loan accounts were becoming variable, and we wanted to be ahead of the ball. At that time, Wells Fargo said they couldn’t help us because we were not in a hardship and we were not past due. All they were offering us was to modify the loans for 1 yr. However, we didnt want a temporaty modification cause we knew 1 yr later we would be in the same situation again, facing variable unpredictable loan payments (needless to say it is 1 yr later and the economy is worse than it was in 9/07). We decided to keep making payments until early 2008 when the payment on the 80% loan converted to variable and we saw that we could not afford it. Again, Wells Fargo could not offer us any assistance because supposedly we could still afford the variable payments. We were told we could not refinance since the value of our property was not there (duh!). That left us with upside loans and variable rates.
So here we are in 11/2008 we tried getting assistance from Wells Fargo one year ago and currently STILL trying. It has been several months since we have stopped paying and still no notice of forclosure and currently waiting on a representative from Wells Fargo to call us in regards to HUD’s HOPE for homeowners program.
To top it all off we were never informed that our 20% loan became due and payable after the 3 years expired.
We recently found out both of our loans might not be considered regular mortgage loans. Since we have a Smartfit loans which are Home Equity accounts and possibly recourse loans. Meaning they can come after us after the difference opposed to a regular mortgage loan.
We strongly feel we were painted a pretty picture and since we were young and eager into getting our own place we took the Wells Fargo information as face value and belived what they had to say and not knowing we would not be able to afford our monthly house payments if this was a principal/interest and taxes regular 30 year loan. I guess you can called it stupid or naive but this loan was basically a bad loan to start with, not a Smartfit……..
Roger
Cathy
Well, I just have a couple comments.
1. Look up Project Hope on the internet. I have the number at work, and I’ll try to remember to come back and add it, but I’m getting old and forgetful. They may be able to help you if you’re at least 3 months in arrears.
2. Sad news here…except for reverse mortgages, and maybe a mortgage your mother makes for you, ALL mortgages are recourse loans. When I lend you $XXX,XXX I expect you to pay me that much money. If you sell your house for less than that, you still owe me the difference. I expect you to do whatever it takes to get that money for me. Every loan except reverse mortgage works that way.
3. The 20% loan. Your loan docs, the ones you signed, say if it’s payable in 3 years. You should have read them before you signed them.
Young and inexperienced maybe, but you could have asked someone for help. Smartfit is a Wells Fargo product, so I don’t know anything about it. I can’t see how both loans could be considered home equity loans. One should have been a purchase money 1st and the other a purchase money 2nd. I guess WF could do something funky but it’s not the standard process. The 2nd is usually regarded as a cash out loan, but not home equity. Semantics to you maybe, but it’s important in loan processing circles.
I’ve never liked 80/20 loans because you’re not putting any of your own money into the purchase. On an 80/10/10, you’re coughing up 10% of the purchase price, and have a greater stake in the property.
Do you have 401(k)? You may be able to make yourselves loans from them, and then you pay them back through payroll deduction. Not a great idea, but if you’re young you’ll have time to replace what you use now