Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…
Q. My wife (before I met her) refinanced her home for about $110,000 with a lender who approved an adjustable rate loan. This loan was given to a person who works as a nanny and could not show proof that she worked and received a paycheck every week. Is there a way for her to refinance this house to a fixed-rate loan, or does she need me to refinance it for her? If I need to refinance it for her, is there a way we can do this and still keep the Prop. 13 tax relief she has presently?
Note that she works as a nanny and has an employer who refuses to provide her a W-2 form.
A. Loans today are available only to people who can prove their income and the likelihood of its continuation. That means you need to go on title and become the borrower. Check with the county, but I strongly doubt this would trigger a reassessment. Heck, it might even be lower.
This is not my field of expertise, you didnt ask, and it is not any of my business, but I believe it is illegal to make payments to a nanny and not do withholding for FICA and Medicare and report the income and remit withholdings to the IRS and Franchise Tax Board. Even though many do this, refusing to obey the law because it is inconvenient is still just plain illegal.
Q. Is there any legal problem with just walking away from my mortgage and letting the mortgage company foreclose on the property? I owe about what the property is worth and I cannot afford to make the payments anymore. I checked into loan modification but was denied.
A. You would be better off pursuing a short sale, which will be less damaging to your credit. Given the situation that you are not wildly under water, the lender would not take a big hit and would likely approve it.
Absent a quick short sale and for those who are really under water, if you were to stop making payments tomorrow, it might be late in 2012 before they asked you to leave. Stick whatever money you can save during this period in the bank for the future. That will give you a fresh start when times improve. Note that a foreclosure is more damaging to your credit than a short sale.
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