January 7, 2011
Like many Americans, I searched for a new job in 2010. Although I wasn’t unemployed at the time of my search, I concluded that it was in my best interest to find a job with a company that offered more stability and in which my job skills would continue to be valued. When I was offered a position which fit my criteria, with room to grow, I opted to take it. This meant no longer living near family and friends, which would be hard. Thankfully, they were supportive of my decision and agreed this would be best. There was one other hurdle. I would need to sell my home.
Very quickly we realized the extent of the economic recession in Illinois, as there was no way our house would sell without our owing money. Like many Americans, we had three options. We could default, we could rent and try and ride it out, or we could short sell. Since we had invested a good sized down payment into the house, defaulting or short selling were not our first choices. We decided to rent if we could find a tenant.
Surprisingly, we did find a tenant who would pay us the same amount that would be required of us to rent a home out of state. Though we would have to continue to supplement the cost of our present mortgage because we would not be renting the house for the amount of our mortgage payment, we would not lose money. We could just hold the house until things got better. The Universe seemed to be smiling on us.
After we signed our contract, the renter backed out. A family lawyer advised us that had we gone after the renter, it would have not only cost us money, but we would not recover the 12 months of promised rent. A number of scenarios could play out; meanwhile, we would not be able to show the house. So, we settled for the deposit, we paid rent to live in our new residence, and continued to make mortgage payments on the home we still owned. In addition, we paid a manager’s fee to the real estate agent, we paid a landscaper to maintain the yard, and we paid utilities on the house. Fortunately, after 3 months of showings, the realtor found us some tenants who were willing to pay less than what we are currently paying to rent the home in which we live. We took their offer in order to stop the hemorrhaging of our savings.
Renting the home which we own, and on which I pay a mortgage while I am at the same time renting a home owned by someone else paying a mortgage, officially qualifies me as a landlord with an income property. This status does not require that I own the home in which I presently reside. This status does not require that I profit from the property I rent to tenants. The mortgage company and the insurance company have determined that I am in possession of income property because there are tenants living in my house. Period. I find this new designation laughable. This is because, as I think I’ve made clear, what my tenants pay me per month doesn’t begin to cover my mortgage.
If I didn’t own my current property, in the amount of time that I’ve been paying rent to live in the state where I took a new job 6 months ago, had I simply defaulted instead of maintaining my mortgage payments, I could have put away $10,000 dollars by now, and that is after taxes. Had I placed that money, pre-tax, into my employer offered retirement plan, not only would I have been assured of some matching funds, I could have socked away a much larger sum for my retirement. Instead, I made the incredibly bad decision to hold onto my house so that I wouldn’t lose my credit, and with the hope that I could sell it eventually, without owing money and maybe making back some of my initial investment.
Ironically, I find myself maintaining the payments on my mortgage out of courtesy to the tenants who are living in my home, while I rent a home owned by someone else. If I simply stop making my payments, the bank would foreclose on my house and my tenants would have to be evicted. I am doing the right thing so that they have a place to live.
I am a landlord with an income property. The banks have not taken into consideration that I am renting the house where I currently reside. My Allstate insurance policy reflects my new status, as well. Because of this new status, I am not eligible to qualify for any of the great interest rates being offered to homeowners. I am told this is because I do not reside in the house that I own. If there were no tenants, I might qualify except for the fact that my home has been devalued so much that I probably wouldn’t be eligible for my present loan amount.
We tried to work with Wells Fargo Home Mortgage because we had heard mortgage companies were willing to make some kind of adjustment on payments that would be mutually beneficial. We counted on the idea that a bank would want to work with people who, in good faith, wanted to hold onto their home. Yet after jumping through all kinds of hoops, being disrespected by numerous people representing the mortgage company, and spending additional money on registered letters that provided all kinds of financial and personal information documenting how we spend our money, we were officially denied because we didn’t want them calling at my place of employment during business hours, making us “uncooperative.” Not only did every call from Wells Fargo take much longer than necessary, answering previously answered questions, but more importantly, my work ethic does not allow me to conduct personal business on my employer’s dime.
I’ve been designated a landlord with an income property yet I’m seriously considering letting the bank foreclose on my house. I no longer can find any reason to keep throwing good money after bad. And no one seems to want to work with me, least of all Wells Fargo Home Mortgage. They have no incentive. In fact, they told us that they could not do a loan modification until we are in default; in arrears by at least two payments. So basically, we must exhaust our savings before they will consider an adjustment, for a house that probably will never be valued at its cost.
I’m a writer, not a financial planner. And now I’m a landlord in possession of an income property. I want to do what’s right, but I no longer know what that is. I have to laugh, or else I might cry.
About Nancy Salvato
Nancy Salvato has worked in the field of education since 1986, her experience spanning grades P-12 as a classroom teacher and as a clinical instructor at the postsecondary level. She is an experienced higher education administrator with demonstrated proficiency in accreditation and licensure, governmental relations, operations, curriculum and instruction, assessment, utilizing a student information system (SIS) and a learning management system (LMS). She received her undergraduate degree in History from Loyola University of Chicago and a master’s degree in Early Childhood Development from National Louis University. Post graduate study has focused the US Constitution, in particular, analyzing the historical, philosophical, and religious influences which culminated in this covenant amongst the citizens of this country and between those governed and those elected to office. An accomplished writer, Nancy contributes regularly to The World and I, a publication of the Washington Times, The New Media Journal, Family Security Matters, and a host of new media publications. Highlights of her career including being invited to the Department of Education to meet with then Secretary of Education, Rod Paige, being selected to participate in the National Academy for Civics and Government, and writing and publishing Keeping a Republic: An Argument for Sovereignty for and through her 501c3, BasicsProject.org.