Betty The Restauranteur

[eltf177]

So it sounds like your bank loses no matter how this plays out...

[Ghel]

Despite what most media sources suggest, banks don't actually like to foreclose, so we'll work with a customer as much as possible before we go that route. And, as sstabeler mentioned, we have to follow the law for foreclosures. We have to send a certified letter stating why the customer isn't keeping up with the terms of their loan, what they can do to fix it, and how long they have (usually 30 days).

Foreclosure is expensive, so it usually pays for the bank to go through a lot of collection efforts before foreclosing. Also, in Minnesota, when the bank forecloses on someone's home, the borrower has a 6 month redemption period to (effectively) buy back their house. A lot of foreclosed houses get trashed during that redemption period.

Betty's restaurant isn't worth anything. The bank wouldn't get much if we had to foreclose and try to sell the building. The house isn't worth much more. In fact, the land is worth more than the house. But if we had to foreclose and the house was trashed, we would have to pay to demolish the house before we could sell it.

[eltf177]

Understand, what I meant was foreclose when the insurance goes unpaid. And given Betty's track record you KNOW it will eventually go unpaid again and get cancelled. At this point Betty and her husband deserve no more chances, end this farce now...

[sstabeler]

Just a never-ending circle of suck. Maybe it's time for a foreclosure while there's still something to collect...

while you have a point, the bank can't actually foreclose at the moment, since Betty is actually in compliance with the loan agreement for once. ( and, for that matter, it IS actually a good thing that the bank can't foreclose arbitrarily. Think about it- a bank could- if they could foreclose while someone was actually in compliance with the loan- put all sorts of requirements in place. ( while I doubt they would get too obnoxious about it, you can imagine someone like GoodHair bringing in a requirement that you have a current account with the bank (A current account is your basic checking account- debit card, chequebook, you get the idea) and actually use it.)

[eltf177]

Just a never-ending circle of suck. Maybe it's time for a foreclosure while there's still something to collect...

[Ghel]

Sorry, I've been busy with other loans, so I haven't thought about Betty much.

We finally received homeowners insurance, but I expect in a few months it will get canceled for non-payment or something. Then we'll have to force place insurance again.

[eltf177]

Any recent update?

[eltf177]

Optimist . . .

Which is why I said "should" - From all this Betty couldn't understand a clue by four to the head..

I wonder what (if anything) hubby's thinking about how this is going down...

[morgana]

Well, the eviction notice should serve as a wake-up call...

Optimist . . .

[eltf177]

Just about what I expected, Betty's not taking the situation seriously again.

Well, the eviction notice should serve as a wake-up call...

[Ghel]

Not much of one. We sent a pre-foreclosure letter in the hopes that that would encourage Betty to get insurance, but she took her sweet time about it. She said she was working with one insurance agent, but we got a binder from a different insurance agent. The pre-foreclosure letter expired. The binder expired. I called the agent, and he said the insurance company was still processing it. He also said that an adjuster went out to the house and told Betty she needed to put up a railing on the front steps before they would issue the insurance. Now we're waiting on that.

We haven't started foreclosure yet because the insurance is still in process. If Betty doesn't pay the premiums, we might still start foreclosure, but it would be more headache than it's worth. Both the house loan and restaurant loan are being paid, though Betty's checking account is frequently overdrawn.

Meanwhile, we have force-placed insurance covering the loan.

[eltf177]

Any update?

[Ghel]

Ghel, does the bank have some sort of mandatory delay before they'll Force-Place on the property? I'm surprised your bank is still waiting for her to successfully buy a policy...

This is going to get a bit technical. The TL;DR is that yes, we have force-placed insurance on the house.

A new bit of regulation was implemented this year that forces us to wait 45 days after we send the customer the first letter warning them that, if they don't provide us with proof of insurance, we'll advance on their loan to force-place insurance. We're also required to send them a second letter 30 days after the first one.

Since we want to make sure they have insurance, the bank set up a general ledger account so we can use that to pay the force-placed premium, then pay that GL back by advancing on the customer's loan after the 45 days is up. If the customer gets insurance before the 45 days, the bank eats the premium for the time the force-placed policy was in place, since we can't legally advance on the customer's loan for that amount.

So as soon as we received the notice from MN Fair Plan that Betty hadn't paid the insurance premium, I force-placed insurance using the GL and sent Betty the first letter. It was nearly a month later that I received the letter stating that Betty had sent her premium check after it was due, and the MN Fair Plan was returning it. Even if Betty applies for insurance again, I expect it will take at least a few weeks before it takes effect. I almost wish I could leave the force-placed insurance in place even after we get her regular insurance, but I'll have to cancel it as of the effective date of her insurance. We can't have two policies on the same piece of property.

[sirwired]

Well, it's safe to say that the IRS, your bank, and every other creditor does not, in fact, actually want to take possession of a restaurant. That's what a lot of debtors don't understand. They think that if they get in over their head, they'll just hand over whatever collateral secured the loan and all will be well, the bank will call it even, and everybody lives happily ever after.

The truth is, that except for crazy-over secured forms of credit like pawn-shops and title loans, the creditor Does Not Want your collateral if there's any chance they can have the money you owe instead. It doesn't matter if they have to take the collateral from you, or you drop the proverbial keys off at the bank, it's always the last resort.

Ghel, does the bank have some sort of mandatory delay before they'll Force-Place on the property? I'm surprised your bank is still waiting for her to successfully buy a policy...

[Ghel]

Yeah, Argabarga, it seems like each of her creditors has worked with her in some way. We have restructured her loans so many times I can't count. The IRS has apparently set her up on a payment plan, since we keep seeing automatic payments coming out of her checking account going to the IRS. (I guess they don't want to take the restaurant, either.) Even the company that delivers food to her restaurant has agreed to continue delivering food as long as she gives them a money order, since they'll no longer take checks from her.