Last October, my Mom who has dementia (but we didn't know how bad it was at the time) cashed out all her mutual funds and used the proceeds to buy a house. At the time, I had tried to get her to do a mortgage but she was furious with her financial advisor (with good reason, but that's another story) and wanted him out of the loop, so she took all her money away from him and bought a house outright.
Shortly after that I took over handling her finances with her permission and with durable and general POA. I investigated getting a mortgage after-the-fact which is called a cash-out refinance.
So now she owns a house free and clear and has a pension with is fine for usual expenses. The problem is that we have some unusual expenses.
My mom's tax bill from cashing out her funds is about 20 K. Her tax guy suggested filing an extension until we could do the cash-out refinance. There are also assorted bills like ambulance transport and rehab facilities and credit cards for a total of about 30,000.
I initiated the cash-out refinance with US Bank on June 10. I explained the entire situation to them--that I would be doing it as POA, that my mom had dementia, etc. They said that was fine, requested 8 million documents, and said it would be 45 days, or 60 at most. I paid the fee of $350.00 to cover home assessment.
On July 21 I was told it was conditionally approved and would be going to underwriting.
Today I get the call that it has been declined because the POA does not specifically list this property and that we can't do a specific POA because my Mom has dementia.
I wish I could sue them up one side and down the other, but the most I am hoping for is to get the $350 back. They declined my mom for things I told them the first time I called.
Any advice?
Btw thanks for the update. It's always nice to hear the end of a story.
It is within underwriting where everything is looked at with a very fine tooth comb, checked and rechecked, and underwriting found some issues. One could still get approval for a loan if the bank could find an investor to cover the mortgage with those issues. Apparently this bank couldn't.
There have been cases where people went to buy a house, apply for a loan, handed in all the paperwork and underwriting jumped through all the hoops and the credit score looks good.... loan approved. BUT.... the day before closing on the house the buyer decides to purchase a brand new car not realizing it will affect his/her credit score and wham, the loan is no longer approved.
Why a cash out refi? They have requirements (a solid credit score maybe in 700's, a loan to value ratio, & ownership time on property), that I'd bet your mom can't meet. A cash out refi is a unusual choice for elderly. Why this and not a heloc?
I found that only Chase had the sophistication to handle an equity loan to the Trustees; the 3 others I consulted really didn't understand how to deal with a trust, or they wanted to advance the entire principal at one time, or charge a higher interest rate. The Chase banker we dealt with even set up a conference call so I could speak directly with the legal department to address their concerns.
Chase also even Fed'Exed me the entire package of loan documents so I could read them before closing, and in some cases, make some corrections to basic information.
If I understand the situation, the cash out generated not only a high income tax bill but tied up your mother's funds so that they're not available for other expenses?
So there's now a liquidity problem for the approximately $30K in expenses?
Since your mother owns the house free and clear, would you consider getting a HELOC? Just thinking out loud here.... I don't know though whether you could get one in your mother's name or in your name; if the latter, you'd probably have to have assets sufficient to pay it off, which would involve your own financial situation.
I don't have any real creative ideas right now, but I'm guessing that someone will come along with some suggestions.
I wouldn't worry about the exact forum for asking this question. It's comingled with other current posts so it will still get attention.
You might apply to another bank. They all have different rules. I would insist their underwriting dept informally bless the POA before you got into the process.
You could also go for guardianship. May be worth it. Too bad no one stopped mom before she made this mistake.