About 3 weeks ago, a single family rental place that I owned caught fire due to the tenants use of a space heater. The damage was substantial and State Farm came out and siad it was a total loss and gave me the full value of my policy to do the repairs. They issued a check to me and my mortgagee for 118k. At the time of the fire I was delinquent on the loan for about 21k in past due, tenants weren’t paying rent, I tried to get them evicted a couple of times, but paperwork was incorrect, property value took a hit, etc. I had resigned myself to letting the places go into 4closure.
In addition to the subject property, I also have another loan with the same bank that I am also past due on. I’m past due probably 25k on that one as well. Similar reasons why on the first. Over the past 7 years, I’ve successfully used the bank to finance, rehab, and then sell about 16 different properties. I’ve also sent over about 10 documentable referrals that have successfully used the bank as well for transactions.
My question is this. I understand I will most likely have to pay the 21k I’m delinquent on the loan on the existing place before they give me a draw against the insuracen check to begin the rehab, however I’m wondersing if they can also force me to bring the other loan current as well? The check is specifically for rehab of one property, but a freind of mine told me the banks can hold me accountable for the other past due as well from this insurance check. Any idea what’s true or not? Thanks
I would think each loan is separate. its the banks best interest to get the home livable again especially if it is foreclosed on. However the bank may keep the difference between the rehab and left over money. Banks do get to control the check these days otherwise many people will take the check and run.
have you discussed the loan with the bank. Maybe see about a modification :banghead
Thanks YRush. I initially talked to a person at the bank who had worked with me on my loan before. Basically the person was non-management and just answered customer service type questions that I had and assisted me with getting the draw checks for my rehabs. In speaking with her she assured me that the bank would set up an escrow account after I brought in the check. I also submitted the rehab estimate directly from statefarm, which showed 163k in total work that needed to be done and my rehab proposal and the different phases of the rehab.
After dropping off the check and leaving a few voicemails I quickly got the impression the bank was trying to change their stance. I finally got a response that said, “Due to the delinquency status of your loan – I’ve been advised that the bank will likely not agree to rehab the house but will use the funds to pay down the loan balance instead.”
I then responded with,
"from what I was told I had 21k past due on the account with a principle balance of approx 92k. You’re saying, you will take the 118k subtract out the 21k past due with the appropriate principle reduction, then take what’s left from the 118k and pay off the balance of the loan? Please advise and also, let me know when you are available for a call to discuss. Thanks "
And that was on Tuesday evening. NO response since. Luckily I called Statefarm and issued a stop payment on the check, so now all they have is a worthless piece of paper :-). My loan b/c of it’s past due status is with a Loan Servicing/ Collections company and I am now in the process of seeing if I can reach a settlement with them or a modification.
Good news is I can just have State Farm fix the place by signing 1 form and they will begin rehab. I won’t have control over much of the day to day, but I will get a completely renovated home and at the point, I can rent it again. I’m crossing my fingers… Any other advice is appreciated. Can’t believe the bank tried to juxx me out of the entire check
I don’t understand why you don’t want to pay your creditor.
If you repair the house you are still delinquent on the loan and will lose the house.
Give the check to the bank. Pay off the delinquency on property 1 and the entire loan balance. Pay down the rest on the delinquency on your other property. Sell the lot on the first property to whomever you can for whatever you can and finish paying off the other delinquent loan.