Auburn family’s path to foreclosure began with mortgage after 2 bankruptcies

[Liberal_in_LA]

Even I'm not feeling a lot of sympathy for this foreclosure situation.

http://www.bizjournals.com/seattle/stories/2009/03/09/s... ^1790042&page=1

Auburn family’s path to foreclosure began with mortgage after 2 bankruptcies

The Obama administration has pledged $275 billion to help families struggling with foreclosure stay in their homes.

It’s too late to help the Binfet family.

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When they signed the papers in 2004, the Binfets had no idea they had taken on a subprime loan. And they have never heard of a mortgage-backed security.

They only know this: Their monthly mortgage payments have skyrocketed over the last four years. When they initially took out their mortgage, they were paying $1,574 a month. Joseph, 46, a lumber salesman, was pulling in $120,000 a year. They could afford for Charlene, 45, to stay home with their children.

But by 2008, the payment had reached $3,125 a month — and they began to fall behind on payments. By then, home prices were falling, builders had stopped putting up new homes and demand for lumber had plummeted, taking Joseph’s income down with it.

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The Binfets probably should have never received their mortgage.

When they signed the papers in 2004, they had only recently emerged from Chapter 7 bankruptcy. It was the family’s second bankruptcy filing.

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The Binfets were given a loan with a rate of 8 percent that only required them to pay the interest initially. They don’t remember if they put money down. If they did, it was minimal, Charlene Binfet said.

“Welcome to loosey-goosey lending,” said Jeff Bell, a mortgage planner with Kirkland-based Cobalt Mortgage. “In 2004, if you could breathe you could get a mortgage.”

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They bought their house for $255,000 — worth $260,000 at the time, according to Zillow.com.

Even though they knew their credit scores weren’t good, they had no idea they were receiving a subprime loan.

“If anything was said to us, it was unclear,” said Charlene Binfet.

[sandnsea]

1. Yeah, they're working overtime to dig this shit up

The Binfets DID NOT INVENT SUB-PRIME MORTGAGES, MORTGAGE SECURITIES, DERIVATIVES, OR LEVERAGING.

They are completely and totally irrelevant to what is happening today. This is 100% the responsibility of Wall Street Financiers who created this entire MORTGATE BASED ECONOMY to begin with.

[Liberal_in_LA]

2. The media seems to keep digging up these unsympathetic foreclosure stories

[notesdev]

22. Just like the bankers

they lied for money. Smaller scale, but there are a lot more of these people than there are bankers - and for every steaming pile of worthless dog doo of a mortgage, there was someone who promised to pay that money back.

But people weren't expecting to pay the money back as per the terms of the mortgage. They were expecting to sell at a higher price and book a profit.

This was a huge cultural phenomenon, not the exception to a rule. There were at least three TV shows dedicated to doing just this, and it was all about making a profit, not about finding a home to live in.

[Blue_Tires]

24. A couple years back, a friend recommended Robert Allen's "Creating Wealth"

and he swore it would change my life...

http://www.amazon.com/Creating-Wealth-Retire-Allens-Pri...

I didn't get around to reading it until late 2008 and by that time the real estate market had gone to hell, so the book was more comedy than self-help (Allen blueprints a simplified, anyone-can-do-it game plan for anyone wanting to play fast and loose in the real estate market, and I imagine a lot of people got seduced into jumping in)

[BR_Parkway]

3. 2 bankruptcys with $120,000 income? Either major medical or piss

poor money skills and impulse control over the credit cards.

Maybe we should put them in the stocks - after all, they've single handedly ruined the economy of the world's richest nation.

[LeftyMom]

23. And lack of planning.

The guy sells lumber. It doesn't take a genius to figure out he'll have wild swings in income depending on which way the local housing/construction market is headed. Somebody with any sense at all would be living well below their means at the peak of that upward swing and banking money away for the inevitable downswing in income when the market swooned.

[cherokeeprogressive]

4. They don't REMEMBER if they put any money down?

Who approaches such an important purchase that way?

[notesdev]

21. They are obviously lying their asses off

They have to sign papers that are extremely explicit as to what they are getting into. They could not have not known they were in a product whose monthly payment would rise over time. These people obviously expected to cash in on a magic housing market where prices would never drop, and got caught with their pants down.

On $120,000/year you can make a payment of $3125/mo., anyway. It would be close to 50% of take-home, but if the rest of their lifestyle was reasonable, it would be manageable. These people clearly have quite a number of other unnecessary expenses that are also eating huge chunks of their income.

They belong in jail. These are serial rip-off artists. Maybe a spell in the joint will give them some time to think about the consequences of taking money that is not theirs to take.

[coalition_unwilling]

5. A very sad story -- they were clearly

victims of predatory lenders along the way.

But they don't remember whether they put anything down? WTF???

Is that something one forgets???

[Liberal_in_LA]

12. No, that's not something one forgets in a few short years.

[JustJeking]

6. As much as I want to sympathize with them...

I just can't! How can you NOT know you've signed onto a subprime loan? Or recall the amount of the down payment? That's negligence on their part, plain and simple. But I also fault the bank for making the loan to a couple with not one but TWO bankruptcies. Jesus f christ.

[Gormy Cuss]

8. I can understand not recognizing the subprime loan. The down payment, no.

As others have pointed out, profiling unsympathetic people seems to be a trend in these foreclosure stories.

I agree with you on the lender -- I wonder what underwriting standards were used, if any.

[Liberal_in_LA]

13. On a $120K salary they could have lived in a nice rental townhouse. But I do

remember how everyone was 'house mad' a few years ago.

[Still Sensible]

7. Granted, this looks like a outlier anecdote that

somebody dug up to highlight an unsympathetic borrower... That said, I'm not buying the "Binfets had no idea they had taken on a subprime loan." I'm sorry, if you've been through two bankruptcies and somebody is offering and qualifying you for a $255,000 loan, you are not a financial dimwit. You have spent considerable time working with lawyers that are expert on financial matters. You didn't think to ask "given our history how do we qualify for a loan like this?"

Of course this is not a typical situation and we cannot let it be perceived that way.

[SoCalDem]

9. Actually they were not "paying a mortgage".. they were paying "interest-only" on a loan

that would eventually settle into a real mortgage, but at a significantly higher rate, and they probably hoped that before that happened, they would either sell it and reap enough profit to convert the whole thing to a realistic (real) mortgage...or they would bug out with the profits, after having been able to live in a pretty spiffy place they could not really afford..

[laconicsax]

10. It doesn't make sense that the subprime loan was the cause of their problems.

$120,000/year=$10,000/month.
$10,000-$3,125=$6,875

Even if you suppose that 50% of their income went to taxes, That's $5,000/month, which should be enough to cover $3,125/month mortgage payments and leave enough left to live on.

I couldn't read the full article at the link--were they dealing with major medical expenses? Was their annual income not $120,000 when their mortgage went up?

Granted, they had twice filed for bankruptcy, but I find it difficult to imagine that they were simply bad at managing money. What's missing from this that makes it understandable that a family making $120,000/year would struggle with a $3,125 mortgage payment?

[dysfunctional press]

11. the linked article is for paid print subscribers only...so we're not getting the entire picture.

for instance, one of the comments to the article says this, supposedly from the content of the article-

"By the next year, they took out a home equity loan for $16,000. The next year they combined both loans and refinanced. Later that year they not only refinanced again, but took out a $50,000 second mortgage to boot, which brought their monthly payment to more than twice what they could afford when they bought the house..."

[tammywammy]

14. Ahhh, well that does change things a bit.

[tammywammy]

15. Here's a link to the whole story

http://www.auctionforeclosureproperty.com/auburn-family... /
select "click here" and it'll take you to the whole story


In the fall of 2005, riding the wave of appreciation, the Binfets took out a home equity loan for $16,000 from EMC Mortgage, a mortgage operation that’s a subsidiary of JPMorgan Chase, the new owner of Washington Mutual. In early 2006, they refinanced for the first time through Countrywide, combining both the loans and dropping their interest rate by a quarter of a percentage point.

Late that year, they refinanced again, taking out a second mortgage for $50,000. They used the money to replace their deck and landscape a yard that Charlene compared to “a war zone.”

This time, their new loan was originated by New Century Home Mortgage, one of the largest originators of subprime loans across the country. In 2004, the company saw loan volume of $60 billion. The new loan was a 30-year fixed-rate mortgage with a 7.25 percent interest rate and a monthly payment of $2,400 a month. The second mortgage had an 11.25 percent interest rate and a monthly payment of $725.

[Liberal_in_LA]

16. So they willing took on an additional $725 in monthly debt just to redo yard and deck.

whatever happened to do-it-yourself? The hubby works in the lumber business, for gawds sake.

[tammywammy]

17. Yeah and they kept refinancing

That's why their payments kept going up, not because it was an ARM, but because they wanted to re-do the backyard.

[kiranon]

18. Forget sympathy. Foreclosures are bringing down property values

for everyone. This particular family probably won't make payments on a new mortgage or write down but there are families that can and their doing so will help preserve the entire neighborhood's property values. I am willing to look at the bigger picture and foregone the "why help them." It helps us all.

[prolesunited]

19. I bet she drives her Cadillac to the grocery store

in a fur coat to buy food with her welfare stamps.

I'm not saying that this story is not real, but it's likely the exception, not the rule. They push this crap to the forefront to piss people off and make them feel shortchanged.

The powers that be really don't want people to know it's people just like them who will benefit and they could be next.

Want to hear my story? It's the exact opposite. And I've heard more stories just like it from people who post on DU.

I would rather risk helping one person like this than turn my back on the millions who played by the rules and were chewed up and spit out by the system.

BTW, where is the personal responsibility and condemnation for the bank that wrote the loans in the first place.

[JerseygirlCT]

20. I'm sorry, but

how could they have no idea about the terms of their loan? And that this "interest only" scheme would only last so long?

And yes, there's no way they should have been offered a loan without a very significant portion down. Irresponsible on all sides, I think.