There is a painful crossroads happening in the United States right now. Buyers are able to by reasonably priced homes at historically low interest rates. The homes are available because people have left their home because they are upside-down with no hope of getting back to even. Some rejoice. Some begin to rebuild.
I could very well be a “poster child” for the mortgage fiasco. Here’s the recipe: one part grief and ignorance, combined with one large part predatory loan market.
In 2004, I was sharing a home with my retired mother. I was unemployed because of a layoff, and she was sick with cancer. I began a job five months later when my mother died suddenly as a result of her cancer treatment. I was not able to afford the large condo we lived in.
I began looking for apartments a few weeks later and found a few possibilities, but a friend referred me to her mortgage broker (she had just moved). Lo and behold, he said I qualified for a mortgage — and I believed him.
He was wrong, and I should have known better
I purchased a downtown St. Paul condo with no money down for $107,000. My mortgage payment, condo association dues and parking made up a financially unsound 65 percent of my take-home pay. In my naiveté, I thought it would work because the mortgage guy said so. What I didn’t realize was that he was wrong, and I should have known better.
I learned some things right away. Condo fees go up. Free heat wasn’t really free. An increase in property taxes painfully affects your monthly payment. My mortgage payment went up almost $100 a month. In order to survive, I worked two jobs for six years. I was unable to keep it all together and rang up a $15,000 credit-card balance.
While it was a struggle all along, I wanted to stay there and it was a good investment. Over the years I tried to refinance several times. At first I couldn’t because of my debt ratio. Then the bottom fell out. There was no hope of getting an appraisal that would justify a refinance, and my credit rating was going downhill at warp speed. Fortunately, I have worked diligently to pay off the $15K in credit-card debt.
One of the things I have learned through this process is that no one mortgage company handles things the same way. I have friends who haven’t made mortgage payments for more than six months and neither has received a note about foreclosure or a sheriff’s sale. Yet, before my three-months-late period was up, I had foreclosure papers in my mailbox. One of the federal mortgage help programs isn’t available to people who have had even one late payment. I find it difficult to believe there are many homeowners looking for help who have never had a late payment.
Modification helped, but process can hurt too
Loan modifications can help with monthly payments, but nothing can address the principal and equity shortfalls. Ironically, I had to pay “$250 extra” for a three-month trial period to get a loan modification (lesser interest rate and slightly reduced monthly payment), and that put me behind on other things. At the beginning of this year, I just couldn’t do it anymore; the pressure was more than I could bear. I didn’t pay my mortgage for two months, which quickly led to the foreclosure paperwork.
At the suggestion of the foreclosure papers and with a sheriff’s sale date set, I contacted a housing counselor for the city of St. Paul. She was a great help in navigating this process. Also, I researched whether to foreclose and came across an article that really helped me. The author took issue with people who criticize those who let their homes foreclose. He said it was a very painful process that people often agonize over. The other thing he mentioned was the concept of equity. I was stuck on the concept of equity because I had always been taught that home ownership was the best investment. So, if I rented an apartment, I wouldn’t have any equity. The author stated that no equity was much better than negative equity.
The proverbial light bulb went on. In my case that was negative $47,000. The investment wasn’t really an investment anymore. The condo I bought for $107K would fetch only $60K on a good day. The $47K won’t come back. It was money going down the drain and it wouldn’t change even with a reset button.
As hard as it is to admit, I decided to let it go into foreclosure. There was no other way out for me. My condo will be sold at the sheriff’s sale.
Sara Fleetham works with kids and families in a nonprofit organization.
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