This house stinks. Help us keep it anyway.
October 17, 2015 10:38 PM   Subscribe

We are trying to avoid foreclosure on a house that we love, but has significant issues that we may not be able to afford to fix. Namely, moisture damage/mold. Are there risks in asking the mortgage company to help?

We bought a house in the Twin Cities (MN) in March. This is our first house and we planned on living here until our young children were grown (at least 15 years). We love this house.

We have had issues with a moldy smell in the house since we moved in. We had a moisture test done which suggested that the sheathing behind the stucco has significant and extensive moisture damage and is probably the source of the smell. The recommendation was to re-side and re-sheath the house. We have not had mold testing done at this point.

We would rather not sell the house, but if we tried to we would need to disclose the moisture report. Even a short sale would be challenging, because, due to the damning nature of the moisture report our realtor thought banks might not finance the sale. We also, ethically, do not want another family to suffer the stress of taking this house on without knowing about the moisture issues.

We put 5% down on the house, and are current with our payments. However, costs to repair the moisture problems are about $45,000, which would be an enormous strain on our finances. We do not have equity in the house (we've only been here 7 months). We can't continue to live with this problem indefinitely.

Question: Is there any chance our mortgage company would prefer to modify our loan so that we could afford to make the repairs, rather than let it go into a short sale (unlikely to be successful) or foreclosure? Or, more importantly, is there any reason not to ask? It seems to me that forgiving $40,000 (or, hey, even $30,000) would be better than the bank having to start from scratch on this house after foreclosure, but I know nothing about the bank's perspective on these things. I feel like we have nothing to lose in asking, but is there an angle here I'm not considering?

(Please assume legal routes have been explored and that we are not able to sue the seller or inspector.)
posted by anonymous to Work & Money (11 answers total) 2 users marked this as a favorite
You may not be able to sue the seller or inspector but there is significant stucco litigation against the builders and installers, lots of it in Woodbury in the 90s houses. Memail me if you want more info on this route.
posted by littlewater at 10:50 PM on October 17, 2015

No help on the bank issues, but unless you have a enormous house or there is more work to be done than siding and sheathing, $45,000 seems really high. Do you know what the source of the moisture is and how that will be fixed?
posted by ssg at 11:07 PM on October 17, 2015 [1 favorite]

Following up on littlewater's info, here are some excellent answers from the Woodbury website about the potential cause of the problems, local resources, and options. Most of the information is relevant to homeowners throughout the Twin Cities (including people/companies to contact).

In addition, I'd recommend checking with your local neighborhood association. There are many parts of the Twin Cities where the neighborhood associations provide low-cost loans and/or grants for home rehabilitation. Programs vary, but perhaps it is a resource?

Also, I would have no qualms contacting the mortgage company about the issue -- especially with an official inspection report. Ask them for help finding solutions. Just be careful that you specifically state that no decision/change in your mortgage will be authorized until you have done further research, etc. Good luck!
posted by apennington at 11:32 PM on October 17, 2015

My guess is that the only help the bank could offer you would be a HELOC or other type of repair loan, but if you're already at 95% of the home's value, they may not go for that. (The kind of "it seems like it'd be in their best interest" thinking you're doing seems rare by banks because they have to follow guidelines of existing programs.) (Also, if you're paying PMI, then it might be that a foreclosure would be covered by the insurance such that it's not in their best interest to eat $30-40k. Just speculating.)

I don't think 45k sounds excessive for sheathing and stucco, but I don't know your local construction market. I could look up what we paid to re-stucco our house if you like.

I think it might be worth asking a lawyer about getting a rescission or additional credit on the sale, and about whether this is something that an inspector should've alerted you to.
posted by slidell at 12:35 AM on October 18, 2015

From the OP:
Thanks for your consideration so far. Here are some more details.

The house was built in 1937. It is not covered by the Great Stucco Catastrophe of the 1990's. The source of the problem is most likely related to ice damns/poor roof insulation. The estimates were for the roof, plus insulation (about $9000) plus stucco tear down and re-siding/insulation/etc ($30-$35,000 depending on whether we go with vinyl or cement board). We are not looking into re-stuccoing the house, which is (even more) prohibitively expensive. We have looked extensively into community/city/county/state/federal funding options. There is one program that we qualify for, but our combination of lack of equity and moderate (not low) income is working against us here! Thanks for that tip as well!

It sounds like getting help from the mortgage company is unlikely, but again, is there harm in asking?

Thanks again, everyone.
posted by taz (staff) at 2:05 AM on October 18, 2015

We had a moisture test done which suggested that the sheathing behind the stucco has significant and extensive moisture damage and is probably the source of the smell.

It seems extreme to consider such extensive work without being sure of the cause of the problem. Aside from (inherently questionable) readings on a moisture meter, is there any evidence of active roof leaks? The house must've passed inspection so I'm guessing there isn't much or any visible moisture damage. Has anyone cut exploratory holes through the interior plaster so that you can look right into the areas where damage is suspected? I sure wouldn't seriously contemplate tens of thousands of dollars worth of work without cutting/drilling a few holes that are basically free. You might find yourselves climbing a stepladder in your bedroom, clicking on a flashlight, peering in at fuzzy and dry 80-year-old roughsawn boards and saying, "Welp, that wasn't it. Where else can that dang smell be coming from?"

You haven't been there through a winter yet, so I'm assuming you haven't actually seen ice dams. Since you haven't said that the problem has gotten worse over the months you've been there, I'm imagining a fairly subtle smell that's getting on your nerves rather than a pervasive stench that sends you staggering out of the building. Maybe you can take this a little more slowly rather than reaching for nuclear options?
posted by jon1270 at 5:59 AM on October 18, 2015 [4 favorites]

Who is your mortgage lender? In my experience, big banks are happy to foreclose. Ours preferred to give up a year+ of our mortgage payments, foreclose, let it sit vacant for a year, and then sell to a flipper for less than 1/3 of what we owed, rather than modify the 10.5% rate on our second mortgage to something a little more reasonable. (6.5% would have let us keep the house. We didn't even ask for a reduction in the amount we owed.) Maybe things have drastically changed in the mortgage industry over the past 4 years (there were some class-action lawsuits regarding their unwillingness to make modifications when appropriate), but I wouldn't put much hope on them helping you out or modifying your loan. You might have better chances of this if your lender is a credit union or small bank.
posted by belladonna at 6:51 AM on October 18, 2015 [1 favorite]

I would make a claim with your homeowner's insurance.

Also, have you explored the possibility of getting another loan to pay for the cost of repairs? I realize you don't have much equity to borrow against (and additional debt may be too great a burden) but a bank may be willing to help you out.
posted by stowaway at 8:28 AM on October 18, 2015

It sounds like getting help from the mortgage company is unlikely, but again, is there harm in asking?

This might be another good question for a free consultation with a lawyer. I wonder if there are ways in which declaring to your bank that you'd deliberately allow the house to fall into foreclosure could work against you -- e.g., are there any legal distinctions between intentionally walking away from house payments and instead simply being unable to afford them. Could this make a difference in the likelihood of them successfully seeking a deficiency judgment, for example? It seems unlikely to hurt you, but I would hesitate to just assume that, especially when dealing with what is (through one lens at least) your soon-to-be legal opponent.
posted by slidell at 8:40 AM on October 18, 2015

I know of people who have had successful insurance claims for ice dams and subsequent leaking. If you wanted to go this route, I would definitely recommend that you wait through the winter until there is water intrusion and then make a claim.
posted by ssg at 8:43 AM on October 18, 2015

We are trying to avoid foreclosure on a house that we love, but has significant issues that we may not be able to afford to fix.

It's time for some DIY to save your house:

If the roof is actively leaking now (before the snow), re-shingle around and above that area. Maybe you can't afford to replace everything now, but fixing moisture intrusion must be done before the rest of the work. If you can stop moisture getting in everywhere, the house will dry out and last until you can fix everything. Go to youtube and search how to replace shingles and do it.

Assuming your ceiling is insulated (and not insulation attached to the roof), you need to replace or significantly increase the insulation in your ceiling. Get up there and inspect the insulation; if it's wet or moldy, remove it; then rent a blower and blow in insulation until you have R-40 (or R-50 if you can swing it). Depending on the size of your attic, it'll probably cost $300-$1000. You then need to increase air flow through the attic; the right way is to install more vents, but the fast and budget solution is to stick a box fan at the vent to blow a lot more air into the attic. You won't get ice dams if the whole roof is cold. More info.

If the roof itself is insulated, there should not be any insulation in the ceiling. You should replace any insulation that got wet. If you can add more insulation, that will help. You should again have at least R-40. You might have to use polystyrene boards over the rafters if you can't fit thick enough fiberglass batts between the rafters.

Fix the ice dams by following this article.

Stop moisture leaving the house into the walls by sealing every internal crack, around every outlet box, and every other opening you can find. It'll help the sheathing dry out.

Do this and you can wait many years before the siding needs to be fixed, if ever.
posted by flimflam at 1:58 PM on October 18, 2015 [2 favorites]

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