Betty The Restauranteur

[eltf177]

Sounds like Betty's world is about to come crashing down...

[Ghel]

... I bet when she does lose her place (and sooner or later she will) she will claim it is all the evil bank's fault.

I'm sure she will. She'll say something like we didn't work with her, like we did in the past. Even though we are working with her as much as we can.

I had to remind Goodhair last week that we have an SBA (Small Business Administration) guarantee on the restaurant, so if we have a loss on the restaurant loan, the SBA will pay us back about 75% of that loss. So we don't want to put the whole debt from the restaurant on the house. We just want to leave the restaurant loan alone, if we can.

[earl colby pottinger]

Chances

I can't believe the number of times you guys have given her chances to catch up, yet I bet when she does lose her place (and sooner or later she will) she will claim it is all the evil bank's fault.

[Ghel]

Yes, quite a bit of updates, actually.

We finally received the proof of insurance for the house last week. It was through the Minnesota Fair Plan, which is a last-ditch service for homeowners who can't get insurance with any other company. It only covers the tax value of the building, which in this case is about $10,000 less than the amount of the loan. After talking it over with Goodhair and the new Branch Manager, we decided that was good enough. If Betty and her husband have a loss on the house (say it burns down or something), there's still plenty of value in the land to cover the difference.

I started the preliminary documents for the balloon renewal on the house. We still only have 2011 tax returns, so no proof of income, but they got us everything else we needed to renew the loan on the house. When I was gathering information about the house, I discovered that they have some sort of quarry on the southern end of their property. This is something we weren't aware of. So when BM went out to take pictures of the house for the loan file, he also took pictures of the quarry. It wasn't running when he was there, but there was equipment still on site. Goodhair thought it might be a sand quarry, and the piles of rocks around the edges were byproducts. So there should be some income from that, but we have no documentation of it.

We got Betty and her husband in last Thursday to go over the preliminary documents for the balloon renewal of their house loan. They were generally agreeable and seemed happy that we were renewing the loan. Neither seemed surprised when I told them their credit scores (both 600 or under, which is horrid). Even the husband, whose credit score had been over 800 (which is excellent) six months ago, didn't seem surprised or upset at his low credit score. Which means that they're aware of their credit situation.

BM sat in on the meeting. Once we were done with the loan documents, we went over the real estate taxes on the restaurant again. They didn't have a plan to pay them, other than the inheritance that Betty thinks she's getting from some relative, but she has no documentation that she's owed that money. Betty said that she wants to keep the restaurant, which is good. On Goodhair's suggestion, we offered to do a second mortgage on their home to pay the real estate taxes on the restaurant. There's plenty of value on the house, especially in the land, to cover another $9,000 to pay the real estate taxes on the restaurant through the end of 2015. Betty seemed to like the idea, but her husband was quiet. They said they'd talk it over.

Betty and her husband will be coming in Thursday or Friday to sign the final documents for the balloon renewal on their house. They're supposed to tell us then whether they want to do the additional loan. BM even suggested that, if Betty does get the inheritance, she could pay off the 2nd mortgage with it. Betty said she wanted to pay down the loans with the inheritance money, which would be a good thing both for her and for the bank.

But if they come in Thursday or Friday and say they don't want to do the 2nd mortgage, we'll have no choice but to foreclose based on the past due real estate taxes. We need to make sure we can foreclose before the county takes the restaurant tax forfeit. I feel sorry for Betty (a little), but we've worked with her as much as we can.

[Seanette]

Any new "fun"?

[taxguykarl]

It still annoys me that he claimed (last November) that he could make some income, if he wanted to, but he doesn't want to show any profit on his tax returns.

My first amended return showed the custy with a huge-ass profit on some business--amended to show a loss. As she explained, she needed to show that income level to qualify for an auto loan. I can only hope she paid on the loan with the thousands in new refunds.

I always document who makes such decisions, in casewhen it comes back to bite me.

Corrected for you. This sort of thing will sooner or later.

[Ghel]

I haven't had any more contact with Betty's husband. It still annoys me that he claimed (last November) that he could make some income, if he wanted to, but he doesn't want to show any profit on his tax returns.

Now that our new branch manager is here, Goodhair is taking a more hands-off approach to the loans. But he is advising us on how best to handle some of the loans, in his opinion. I always document who makes such decisions, in case it comes back to bite me.

[Tama]

You know shit is going down when even Goodhair gives up on your complacent ass...

[eltf177]

And I'll bet the husband is no help on that either...

Sounds like the end is near.

[Ghel]

Not quite, but it's close. She finally got together with her insurance agent yesterday, and he verified that he sent in her application for insurance yesterday. He said it will be a week or so before he hears back whether it's been approved. So we're holding off on any action until we hear back on that.

If her insurance is approved, we'll do a short-term (probably one year) renewal on the house, so that loan comes off our past due list. We'll also insist that she does a confession of judgement with the county on the real estate taxes for the restaurant. If she is unwilling or unable (the county wants the current year's taxes paid plus a fee, which she might not be able to afford) to do that, we'll start foreclosure on the restaurant. IIRC, the foreclosure process on a commercial property takes less time than on residential, so we might be able to get it completed before November, when the county will take the property under tax forfeiture.

Goodhair described having a "come to Jesus" meeting with her. I don't think it's quite sunk in with Betty that she's in danger of losing her livelihood.

[eltf177]

Has Betty's house of cards collapsed yet?

[Seanette]

I wonder if Betty's accountant was a drinker before taking her on as a client or if it's a result of that.

[sirwired]

Force-place insurance is much better than it used to be. There was a scandal a few years ago where banks were taking large kickbacks from force-place providers, artificially driving up the cost of the policies to homeowners.

[taxguykarl]

Well that does make sense..kind of like a credit life policy. The kind that only cover the balance.

[Ghel]

I find it hard to believe that any insurer will write a policy for them with their payment history.

There's an insurance "company" called Minnesota FAIR Plan, which is a last-ditch service offered by Minnesota for people who can't otherwise get insurance. And even they will cancel policies if the payment bounces or homeowners don't return phone calls requesting a property inspection.

I think that the deal with force-placed insurance is that, since the risk is high (not so much from threat to property as the chance of foreclosure) the insurance premium is commensurately higher - and the bank gets the payout first if there is some form of disaster.

Actually, the force-placed insurance we use only covers the amount of the loan, so the bank gets paid, but the homeowner gets nothing. Because of that and because it's only hazard insurance (no liability), the premium actually tends to be lower than what the borrower could get.