House Broke

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http://msnbc.msn.com/id/14251743/page/2/

More "great" economic news. This country is headed for a frickin' disaster. The "haves" will be fine. The "haves-less and haves-not" are losing the American Dream.

Sad, sad story on MSNBC.

WEB EXCLUSIVE
By Jennifer Barrett
Updated: 6:35 p.m. ET Aug 8, 2006
Aug. 8, 2006 - When Shawn Howell saw the house in the summer of 2004, he thought he couldn’t lose. The location-close to family and in an upscale subdivision in Louisville, Ky.,—was perfect; the three-bedroom plus loft was just right. The price was a little high at $217,000—especially as Howell's wife, Niki, had just given birth to their second child. But the couple learned they could purchase it with no money down by taking out two adjustable-rate mortgages. The monthly payments would start at a manageable $1,100. And Howell figured the value of their home could only go up in the five years they planned to live there. Instead, two years later, the family have put their home on the market for less than they paid for it—desperate to find a buyer before the bank forecloses on the property. "Looking back, I wouldn't advise anyone to do what we did," says Howell, an Iraq war vet who worked two jobs but still fell short on the monthly payments after they jumped by more than $300. "We just couldn't afford the house anymore."

Across the country, millions of homeowners are finding themselves in a similar situation. Real estate purchases that once seemed like such moneymakers have become financial burdens instead. U.S. homeowners now owe about $9 trillion in mortgage debt. Of that, about $425 billion in adjustable-rate mortgages-initially pegged at historically low rates, but designed to shift with market trends after periods ranging from one to 10 years—will reset sometime this year, according to Freddie Mac, a government-sponsored housing financing company. Another $600 billion in home equity lines of credit (or HELOCs) and second-lien mortgage loans, which became popular when rates were low as a means of paying off credit card debt or financing home improvements, are also being readjusted. Those with fixed-rate mortgages payable over 15 or 30-year periods may be seeing little change, but those who banked on rates remaining near the 4.6 percent lows of 2003, are getting some unpleasant shocks when their mortgage bills arrive in the mail. As their payments rise, many are struggling to keep up. Foreclosures and delinquency rates are rising. And with the markets cooling in many regions—existing home sales across the country have slipped for three months straight and new home sales nationwide have declining as well—there are growing fears of a looming crisis. Howard Dvorkin, president and founder of Consolidated Credit Counseling Services, a nonprofit debt management organization, says up to 10 percent of those now seeking counseling are being squeezed by adjustable-rate mortgages or home equity loans. "And this is just the tip of the iceberg."

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And if you think the Iraq War is not having any impact, read this!

That's exactly what happened to the Howells. In November 2004, Howell, a 36-year-old National Guardsman, was deployed to Iraq. While he was away, the combat pay helped to offset the monthly mortgage payments as they began to creep up. In addition, under the Servicemembers Civil Relief Act, his mortgage rate was capped at 6 percent as long as he was in active military service. But when he finished his tour in Iraq this January, the cap no longer applied and he stopped getting combat pay. Worse, while he was gone, someone had filled his old job. He found work as a stable manager for a nearby horse farm, and as a law enforcement dispatcher for the state's Department of Fish & Wildlife; but, even with the two jobs, he was earning about one-third less than he had in 2004. Meanwhile, the interest rate on the couple's largest mortgage climbed to 9.9 percent.