Borrower fears payments will skyrocket in 2011
DEAR BENNY: I have a hybrid mortgage that is fixed for the first five years at 4.25 percent, and is tied to U.S. Treasury securities. The loan document notes that the index value is 2.1 and the margin is 2.75. The first change date on the loan is Dec. 1, 2011.
My loan documents say that on the first change date my interest rate could be as high as 9.25 percent or as low as 2.75 percent, with no more than a 2 percent increase in any given year thereafter.
Given the current fixed interest rates, is it advisable for me to refinance the loan now or continue to take advantage of the low rate I am paying for another year? What is the likelihood that the “index” could reach 6.5 percent in a year raising my interest rate to 9.25 percent? –Molda
DEAR MOLDA: That used to be a tough question, but with mortgage interest rates currently at the lowest in history, I think there is only one answer: refinance. You may actually be able to get a new rate similar to your current one.
However, if you plan to sell your house within the next year or two, then it probably does not pay to spend money on a refinance loan. There is no guarantee how long these low rates will be with us, so I suggest that you contact your mortgage lender to start the refinance process.
DEAR BENNY: I recently learned that my home, which I purchased new in 1988, was constructed with Quest pipes. I wasn’t aware of the lawsuit that was created during that time. I was told that I have a leak in a pipe and the plumber would have to cut into several walls to find the leak. Do you have any current advice for property owners like me who were unaware of these pipes being used in their homes? –Linda
DEAR LINDA: Unfortunately, where a class-action is resolved, it usually relieves the defendant from further liability. You might want to talk with your attorney to see if he/she would be willing to pursue another lawsuit, although I seriously doubt it.
You just discovered the bad pipes, so any statute of limitations would normally begin at the time of discovery — and not when you first bought the house.
But, unfortunately, you will have an uphill legal fight. You could contact your homeowners insurance company and see whether it will provide any coverage. Otherwise, you will have to “bite the bullet” and pay for the repairs out of your own funds.
DEAR BENNY: Both of my parents died last fall, leaving behind a reverse mortgage that they also borrowed equity from. I am the administrator for their estates though our probate court. They did not leave wills.
I do have an estate bank account in my father’s name, which I am using to pay off some of his credit cards and real estate taxes and homeowners insurance. However, the estate owes a lot more debts than I will ever be able to repay from this estate account. My father receives a monthly annuity settlement check, which I deposit into the estate account, and these checks will continue for two more years.
The home will not sell for what is owed, because it needs many repairs. I don’t want the home to go into foreclosure, so I want to buy it as an investment. However, I qualify only for $119,000 on a second home. My siblings aren’t interested in the property because they have no income.
Can I use funds from my father’s estate account to pay towards the equity he borrowed before I buy it, so the home won’t cost me as much? By the time I buy the home, the settlement costs will be much higher than if I refinance through my own lender. I received a good faith estimate in March of about $125,000.
The home is appraised at about $135,000. The payoff to date is $116,000, but they will add servicing fees and settlement costs, which will put me way over the value of this home. What are my options? –Diana
DEAR DIANA: You should talk with an attorney who understands probate law. His/her fee may be a preference (a priority) under your state law so some attorney should be able to assist you.
You confused me with your question, and I suspect you are also confused. Your father died last year; are you sure that the estate is still legally able to collect annuity checks?
You also have siblings. And although they may not be interested in the house, they have the right to share in any proceeds that the estate will generate. They do have the right to disclaim any inheritance, but that’s a complicated legal issue that needs guidance from an attorney.
The bottom line: The reverse mortgage must be paid off. If your siblings agree (and subject to possible court approval), you may be able to use some of the estate funds to pay down that mortgage.
My suggestion: You may want to consider selling the house to a third party instead of burdening yourself with a second home. But please talk with professionals before any final decision is made.
DEAR BENNY: We purchased a condo four years ago and for the last two years we’ve had a problem with our upstairs neighbor. Their floor above our bedroom squeaks when they walk on it. We can tolerate it during the day but it is ruining our lives at night because we can’t get any sleep. The noise seems to be a problem only during the summer months when it is humid.
Our neighbor denies that there is a problem and the association did nothing to help us last year. According to our documents, quiet time is from 11 p.m. to 7 a.m. We have had enough of this and need to solve the problem.
My questions: Who is responsible for repairing the floor: the condominium association or the upstairs neighbor? And can we demand that it be done? We have a new board of directors and a new management company and they seem to be more sympathetic. –William
DEAR WILLIAM: Unfortunately, you are not alone. Too many new developments that were built in recent years have acoustical problems. And I suspect that your association legal documents define the floors as “units” and not “common elements.”
Do you have proof of the noise? While board members will not like this advice, I recommend that when you hear the noise in the middle of the night, call your property manager — and your board members — and invite them to visit your unit and hear the noise themselves.
Some boards will be cooperative and arrange to hire an acoustical engineer to provide a written report. The report will contain two things: (1) a summary as to the extent of the noise and (2) a recommendation as to how to correct the problem.
If your board of directors is unwilling to pay for this report, you will have to do it on your own.
I am sure that your condo documents contain language prohibiting noise in the units. Once you have the proof (and the engineer’s report), confront the board and remind them that they have a fiduciary duty to enforce the legal documents of your association.
You should also provide a copy of the report to your upstairs neighbor so that he is aware of the problem.
Often, the noise problem is resolved simply by putting carpeting throughout the unit. Suggest to your neighbor that before you get involved in a legal battle, he should understand your concerns and be cooperative.
Ultimately, you may have to retain legal counsel to assist you. Hopefully, however, now that you have a more sympathetic board (and property manager) you will all be able to resolve this problem amicably.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to email@example.com.