- On the House: Unsolicited - and odd - refi offer
- Top Dollar
- Find the place, make a home
- Making castoffs into a home
- Casino-front property on the block Dec. 4
- Q&A: What's the score?
- Recycled revolution
- Toxic loan Rx
- On the Market: Priciest homes in the region
- Find a Home
- Search Open Houses
- Search Recent Home Sales
- Sign up for your free e-mail real estate deals
RELATED STORIES
On the House
Recast mortgage a hiccup
In August, Carl and Susan Schwartz bought a $255,000 house in Huntingdon Valley and sold the one in the city's Bustleton section that she bought 26 years ago, netting $165,000.
They closed on the new house before settling on the old one. Although they were able to put $50,000 down on the new house, the juxtaposition of the two transactions forced Susan Schwartz to take out a $205,000 fixed-rate loan at 5.2 percent.
"I didn't want a mortgage at all," said Susan, 61, a Philadelphia teacher. What they wanted to do was use the proceeds of the sale and the down payment to pare down what was owed on the house to just $40,000 - meaning a monthly payment of just a few hundred dollars, instead of the $1,500 plus $400 more in taxes they are scheduled to start paying Oct. 12.
They could have switched closing dates or taken out a "bridge" loan secured to the house they were selling to accomplish it.
Susan and Carl, 60, a Center City florist, contend that a mortgage consultant from Wells Fargo & Co. told her that they could qualify for a "recast" of the loan "a week later to lower our mortgage payments."
"He said I simply would have to make a phone call, and that would be it," said Carl Schwartz, Susan's husband of eight years. There also would be a $250 fee.
When Susan called for the recast, she said she was told that she had to carry the mortgage for at least 90 days and perhaps longer, until the loan was sold to an investor.
But an e-mail from the Wells Fargo mortgage consultant sent a few days after settlement states that "per our conversation at settlement, you probably will have to make a few payments until it is sold to an investor."
Although Susan Schwartz said the e-mail contradicts what she was told at settlement, Wells Fargo spokesman Tom Goyda said he believed the Schwartzes might have misinterpreted what the consultant told them.
Typically, loan recasts take some time because they require approval of the lender and Freddie Mac or Fannie Mae, whichever is purchasing the mortgage for bundling to investors.
The Schwartzes also needed to be current on their loan, and what concerned Goyda and Wells Fargo was the possibility that the couple would be unable to pay.
If that had been the case and they were, for example, looking for a modification under one of the federal rescue programs, the recast would have been impossible.
"As soon as the investor [for the mortgage] was assigned a few days ago," Goyda said in a Sept. 18 interview, "we were able to get the recast through the system."
Wells Fargo would waive the $250 fee as well, he said.
The whole matter may be moot. When Susan Schwartz got the call from Wells Fargo with the news, she was in Citizens Bank, finalizing a line of credit that would pay off the Wells Fargo loan.
The $165,000 proceeds from the sale of her old house would pay down the credit line to the $40,000 they wanted in the first place.
"And we'll be trying to pay down that $40,000 as fast as we can," Carl said.
Inquirer real estate writer Alan J. Heavens is the author of "Remodeling on the Money" (Kaplan Publishing). His columns appear Fridays in Home & Design. "On the House" appears Sundays in The Inquirer. Contact Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.
