Community Rallies To Save Seniors Home With Reverse Mortgage (Update)

Last week we wrote about how 72 year old Lorraine Zickefoose’s home was scheduled to go up for auction because she fell behind on her payments with Wells Fargo Home Loans.  The woman had applied for a reverse mortgage with John Smaldone’s AAXA Mortgage and was approved, however due to falling property values the she is about $38,000 short.

Smaldone along with Ms. Zickefoose’s church organized a carwash/fundraising event and was able to raise $4,361 over the weekend.  While they still have a long way to go, there are some other positive updates to share.  Below is a copy of an email that Smaldone sent RMD:

Due to all the publicity from places like Reverse Mortgage Daily, Ms. Zickefoose’s story reached Wells Faro’s headquarters. I received a call on Tuesday from Afsheen Alam, Special Resolution Team Loss Mitigation. They are willing to negotiate a settlement.

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I sent a complete package to Afsheen so they can do another analyses, I did make them new offer. I will update everyone as to how much has been raise very few days.

Lets just hope that everything continues moving forward and if any RMD reader from Wells Fargo helped move this along, thank you.

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  • I have a similar file – the homeowners are short by $21,656.01 with the LIBOR 2.75 (so I’m paying for the margin). I’m combining a HECM with a Loan Modification – the HECM will pay Indymac $306,697.96 and we’re asking them to subordinate the remaining $21,656.01. Indymac denied the initial request so the Attorney submitted a second request, with additional supporting information.

    I find it hard to believe Indymac denied the request, because they’ll receive most the cash when the HECM funds, and we’re not asking them to forgive the remaining lien, just subordinate it.

    The homeowners recently got cancer and all their time, energy and money has been directed to taking care of that problem, and now they can’t afford their house payments and are going to lose their home if Indymac says “no” again. The file has been sitting and is ready for final docs. Meanwhile, margins keep going up and it keeps getting worse for the homeowners.

  • Mr. Denton,

    My experience with the former IndyMac Bank is that they will subordinate if the loan is held by the bank but if it was sold, they will not. As a servicer, their covenants to investors do not permit them to subordinate. Please let us know if you hear something different.

  • Mr. Smaldone,

    Great job! My office is following this saga. Here is hoping that Wells comes through with a deal that gets this loan closed. Keep up the good work.

  • Mr Denton –
    How about a fxed rate product that will give a larger $$$ benefit to the borrower in this case?

    I’m certain we all have file after file that falls short, with most seniors being left out in the cold as a result. The wave of these files has to hit soon, as so many younger seniors did use the home as an ATM in the “crazy years”

    Great news about the WF loan Mr Smaldone!

  • Our firm has closed successfully two reverse mortgage loans that involved payment less than in full to the existing lien holders. In both cases, the amount forgiven was not large, and there was strong motivation for the lenders to cooperate.

    Unfortunately, most lenders are not inclined to help senior homeowners to get out of trouble with a reverse mortgage because there still is a large amount of equity remaining in the property, and they could recover a greater amount through foreclosure.

    I am familiar with one instance not involving our company in which an attorney representing the homeowner convinced the existing lender it was in its interest to cooperate by accepting reverse mortgage proceeds as payment in full. Reference was made to possible defects in the origination of their loan.

    With class-action litigation pending against several sub-prime lenders alleging they did not adequately investigate the borrowers’ ability to repay their loans, perhaps some of the cases involving senior homeowners could be resolved by the lenders’ acceptance of reverse mortgage proceeds as payment in full.

  • Good day,

    I appreciate everyone’s support pertaining to what I am trying to accomplish for Lorraine Zickefoose. I am optimistic good rather than evil will prevail.

    James Veale, thank you for your comment and support, it means a lot. One of the main obstacles I have in this case is that the loan was sold. Wells is just the servicer of record. However, that does not mean Wells Fargo can’t negotiate with the lender who owns the loan.

    Afsheen Alam, the individual in the Loss Mitigation department of Wells Fargo is who I am now dealing with. Afsheem has been very good to work with. In fact, she has been the only one that has shown any passion at all what so ever within Wells Fargo that I have dealt with.

    Unfortunately, we do not have a program to help out people like Lorraine Zickefoose and the individual Raymond Denton is referring to.

    Our so called stimulus bills and the affordable housing bills do not provide any relief for a 72 year old handicapped widow. We are talking about a woman that only has a social security income of $1,150.00 per month. Well guess what, she does not qualify for any of the modification or relief programs available.

    Sure does not make sense, does it? Yet the person that may have bought a home with a NINA or Option Arm program in hopes of flipping the home to make a large profit, can qualify. Boy are we one heck of a mixed up nation. You have to wonder how we put people in positions to make major decisions for our lives ever get where they are.

    Again, thank you all very much for your support, you are all great.

    My best,

    John A. Smaldone

  • >>How about a fxed rate product that will give a larger $$$ benefit to the borrower in this case?

    The fixed solution works now – because the Expected Rate for the LIBOR has risen since I first originated the file, but it’s too late because its ready to close with Generation Mortgage, and I’d have to switch it to Metlife to take advantage of the 5.56% rate. That would be a problem since I’m combining this Reverse with a Loan Modification program (because the numbers need to be stable in order for the Attorney to negotiate with Indymac).

    I ran the numbers and the homeowners shortfall would be reduced to approximately $14,000.00 with Metlife’s fixed, compared to approximately $21,000.00 with the LIBOR 2.75 – but everything is already in process and it’d be painful to switch Lenders at this stage.

    Combining Reverse Mortgages with Loan Modifications when Fannie Mae continually increases margins without honoring locks is just plain painful – but I’ve got to keep at it. The homeowners and their entire Church congregration are continually praying.

  • Raymond,

    Good thinking. We are going to do just that. We are waiting to see exactly what Wells Fargo comes back at on Monday or Tuesday. If it means saving Ms. Zickefoss’s home, I have no problem changing investors.

    I also agree with you on the FNMA issue. Something must be done to bring regulation back to the HECM. They want us to believe more regulation is in force than that of two or three years ago, poppycock. I can go on and on about this subject but you know what I am talking about.

    I appreciate you offering your help and suggestions. We are a team and we must help one another to maintain the standards of our industry. You have a good day sir and my thanks to you once again.

    Best regards,

    John A. Smaldone

  • I am cheering for you and your borrower John!

    Here is a thought for the whole industry, obviously there is a HUGE need for what John is doing, but there is no way you can have a pipeline full of these types of deals AND do the negotiating that is required. You would end up working for less than $1 per hour!

    I suggest teaming up with a LEGIT loan modification company to handle the negotiating. We currently have 42 RM’s in process that are identicle to the deal discussed here. Although I have personally done the negotiating on several deals in the past, all 42 of these deals have a loan modification expert working on the negotiating while I focus on doing what I know – the Reverse Mortgage.

    THe modification company will be paid on the HUD at closing as is permissable under HUD guides. I suggest that we move as an industry to partner with experts and save A LOT of homes and Seniors. As always, focus on what is best for the Senior and that will guide you. We have a moral obligation to serve our clients and the unique position of making it a win-win far all involved. BE BOLD and do what is right!

  • I am trying to do the same thing for one of my clients. Hi is 72 and disabled and just suffered a major heart attack because he has been so stressed out about losing his home. He has a first and second with Chase and using the fixed rate program he is only about $5000 short.

    It is a very slow,long, and frustrating process but I am optimistic it will work out. I can’t imagine this man losing his home for $5000.

    Due to the decrease in property values, there have been many people I have not been able to help. It is very frustrating. Something has to be done to help these seniors stay in their homes. Maybe some of these reverse mortgage lenders could increase the equity percentage they are allowed to use when it is a situation like this.

  • Mia,

    I understand what you are going through. As far as your client, have you submitted an offer to Chase to settle for the proceeds from the Reverse Mortgage. For $5,000 they should settle. You need to get a permission letter from your client, giving you the authority to negotiate the loan on his behalf. Once you get that, you need to get to Chase’s Short Sale/Short Payoff department and get assigned a negotiator. From that point on it is a matter of getting a lot of documents together from your borrower. It is a long drawn out process. You may have already started the process? Let me know what stage you are in with your client.

    As far as your statement about something has to be done to keep seniors in their homes, I agree with you 100%. I have tried proposing to various congressmen and senators a subsidy program for seniors who are delinquent on their payments or going into foreclosure. It would be an appropriation bill to provide funds for those seniors that have applied for a Reverse Mortgage and came up short in paying their existing loan off. The funds from the appropriation bill would go toward making up the shortfall or to be able to negotiate with the lender a settlement on behalf of the senior.

    So far, no one is biting. I have suggested using some of the so called funds already appropriated but I still have not gotten anywhere with it. The problem is that there is no provision in any of the stimulus bills or affordable housing bills ETC that gives relief for a senior that can’t qualify for one of these modified loans out there. It is a sad thing to see some one bailed out of a foreclosure that bought a home, entered into one the sub prime or option Arm loans for the purposes of trying to make a quick buck. The market crashed, now the borrower is stuck holding the Bag. They go to the Fed’s or their lender and apply for one of the modified loan programs. What gets me is that they can qualify, the get bailed out but for our seniors who need it the most, we have no program for them. We sure live in a mixed up society, don’t we. Thanks for your comments Mia and good luck with your client. If I can be of any help, don’t hesitate to contact me.

    Best regards,

    John A. Smaldone

  • We have had a HECM case in California in which the customer, a cousin of one of our loan officers, was behind in his payments on his Cal-Vet loan. This type of loan, which is made by the State of California to eligible veterans, actually uses a land contract, rather than a deed of trust or mortgage, as security for the loan, meaning the borrower doesn’t receive legal title to the property until the Cal-Vet loan is repaid. The FHA took the position that the veteran was not eligible for the HECM as he did not hold legal title to the property, so we waited for the HECM for Purchase program to be implemented. The property continued to decline in value as we patiently waited for this to happen.

    Once the HECM for Purchase program became effective, we petitioned Cal-Vet to accept a slightly reduced payoff (we’re talking about less than $5,000) in order to help the veteran obtain his reverse mortgage. (Our loan officer had thrown in his commission, and our company made an additional concession.) Cal-Vet refused to give even one dime of relief, stating that the bondholders must be made whole.

    In the meanwhile, the appraisal expired, the property value has declined further, and we’re now even farther away from being able to conclude the HECM for this veteran homeowner. He may lose his home, but the bondholders will remain whole.

  • Hi John,

    Thanks for the response. My client did write a letter to let Chase know that I will be negotiating for him and it was just assigned to someone in the short payoff department. That only took about 4 months and me re-faxing the same material 5 times over because it gets mysteriously lost each time.By time this ever does get approved all of our documents will have expired. I am taking a huge cut in my commission and I got the attorney to do it for next to nothing. Will be very happy when I know that it is done and he hasn’t lost his house!

  • Mr. Ervin,

    In principle what you suggest is right on point; however, it lacks significant protection to the reverse mortgage originator. Unless an originator is mandated by an employer to use only one source, originators who only recommend one attorney, CPA, CFP, annuity provider, loan mod entity, etc. not only look unprofessional but could have indirect liability for the actions of the “professionals” to whom they “steered” their customers.

    I know there is “I scratch your back, you scratch mine” principle in networking; however, it is a dangerous principle to follow in our industry.

  • Mr. Veale,

    I understand your concern. Perhaps I was not clear enough. I am recommending to other Reverse Mortgage Originators to call on Loan Modification companies as a source to GET referrals.

    I currently work with three modification companies and RECEIVE referrals from them. That is how I have 42 of these types of transactions going right now. When I come across a Senior in need of these services, I give them all three companies for them to check out their services.

    It is clear to me that we can accomplish a great deal of good for Seniors when we work in tandum with modification companies and still do the volume that allows us to stay in business.

    As for “scratching backs” – I try to reserve the body rubs for my wife. I found its safer to stick with her than to scratch strangers.

  • Mia,

    I understand the frustration you are going through. We should not have to put our seniors and ourselves through this.

    I know what you mean about the doc’s expiring. Lorraine Zickefoose had to take her counseling over again, I wound up paying for it. The appraisal is good until the end of June, I hope to close it before than.

    Mia, you are doing a wonderful thing for your borrower. If everything works out the way it should, you will feel within your Heart an experience you could not buy with money. I am proud of you, keep fighting on, you will win. Keep me posted and I will do the same.

    Best regards,

    John A. Smaldone

  • dduck,

    I want to thank you very much, I appreciate you for that. I think we should be proud of all of us who take a stance. People like you have shown the compassion and interest to get involved, I am proud of you as well.

    Best regards,

    John A. Smaldone

  • John and dduck,

    Thanks so much for the support. It is so nice to get to talk to others in the industry for guidance, ideas, and a little bit of “cheerleading!”

    Talk to you all soon.

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