Captured? Questions

[greatchef]

What is the name of your state?Massachusettes

I had posted earlier about helping a friend that was way behind in house paymenys and wanted to refinance to bring payments up to date. To make a long story short,her x husband (whose name is on the title) decided at the last minute to become involved looking to refiance with her for future consideration. In the beginning he had agreed to come up with some money to make up for the money due on the loan to have it looked at for lowere payments ( I have recently found out this is an old farmers loan, I think it has been renamed to Rual something)

He then decided he would rather refinance to lower the interest rate,and get some money for himself.In his talking to refiance companies he has told his x wife that because the loan was from Farmers that it would not be likely taken on by a refianancing company.Is this true as he has decided to abandend the whole affair unless she finds a company that would refiance.

Also the word "capture" has poped up that there is anothe 131.000 dollars that is in captured form or would be in this form which I can not seem to find info on . Is this money held against the equity. Very confusing. Thanks

[baker10]

I think that you may be talking about a USDA Rural Housing Service Loan. If the payment on the loan was subsidized, meaning lowered acccording to lower income, with part of the monthly payment being paid by the government, then, that subsidy, everything paid by the goverment, is subject to recapture. This means that in final payoff, all that money will have to be paid back. This of course can significantly lower any cash back to the borrower. However, you can apply for a subordination of the subsidy if you can show that the money will be used for needed repairs and home improvements. The subordination allows for an accounts receivable account to be set up for the amount paid by the government. This is paid back when the house is sold or tranfers ownership. It is basically a lien on your property. You can find a lender who will do this for you, but it's not easy. Be absolutely sure that they are reputable lenders and experienced with these types of loans. Check them out VERY carefully, because this is an easy one to mess up and make sure they know exactly what is needed to do the subordination and have all their ducks in a row BEFORE you sign any closing papers. Good Luck! I am not a professional. I am just a borrower who has had experience refinancing this type of loan.

[baker10]

almost forgot to mention that in order for the subordination to be approved, the HUD 1 has to show no cash out directly to borrower as well as your lender not paying off any other debts. If you need the subordination for home improvements, they require the excess funds to be in an escrow account with your lender to be paid to the contractor. I believe they can also make other arrangements, but it's very difficult to get an exception on any of their guidelines. However,if you decide to payoff the recapture completely instead, you will get a 25% discount. Again, make sure your lender knows what to do. We got a subordination approved, which was extremely difficult, and in the end, our lender screwed the whole thing up on the payoff. It's very frustrating, just so you know what to expect. Good Luck!