How one family's mortgage is linked to meltdown

[UpInArms]

Source: Reuters

HAMPTON BAYS, New York, Dec 29 (Reuters) - Cynthia Goldrick's daughter is in and out of the hospital for brain surgery, her mother has Stage 4 lung cancer and her father has moved into a home for the elderly.

So when the Goldrick family's adjustable rate mortgage reset while husband Patrick was off work for a job-related injury, it eliminated the thin margin between their income and the mortgage payment and put them on the road to foreclosure.

While these circumstances may seem extreme -- a perfect storm of bad luck -- the basic economics of a hike in mortgage rates and a bank's inability or unwillingness to modify terms have been shared by many Americans over the past year.

<snip>

At first, the interest rate was 6.5 percent and the monthly payment was $2,370. After two years, it rose to 9.5 percent and suddenly the payment of $3,850 was beyond the means of a family living off Patrick Goldrick's salary as a cable guy.

<snip>

But the mortgage is in the hands of neither because it was securitized, pooled with $700 million worth of mortgages into an investment vehicle created by Morgan Stanley (MS.N) known as IXIS 2005-HE4, and sold to investors.

Read more: http://www.reuters.com/article/bondsNews/idUSN2451716720081229?sp=true

---

and this story goes on to tell the tale of how our disgustingly ineffective health care systems has failed to be available at cost that are not crippling to families with children with medical problems

all of the is goes so much deeper into the failures of this country than just the sub-prime greedy meltdown

[mike_c]

1. OK-- I realize this isn't the real point of the OP, but holy WTF, batman....

$3,850 per month mortgage payment for a blue-collar worker?! That is utterly insane.

I'm a tenured university prof and academic scientist, but I could never afford to pay anywhere near that much for housing. My monthly rent is $900-- admittedly a good deal in my neighborhood, but the point I'm trying to make is that I could NEVER afford to pay that kind of money for shelter. My monthly net salary isn't much different than that mortgage payment.

Who in their right mind would pay that much for housing, unless they were making so much money that $3,850 was less than 30 percent of their monthly income? That is just crazy! Are there really blue-collar wage earners out there drawing down fifteen grand a month?

The more I hear about the details of the mortgage/foreclosure meltdown the more astounded I become.

[FreakinDJ]

2. That is utterly insane

For a $3,850 per month mortgage payment, you would have to have $10,000 disposable income.

So how did they qualify for that

[WriteDown]

4. Gotta be a liar's loan nt.

[sandnsea]

8. There's a malpractice fund

For the daughter's medical problems. Maybe they were able to claim part of that as income for the daughter's needs.

[Mojorabbit]

9. It started out at

$2,370. I can't imagine what it would be like to have my mortgage go up by around 1400 a month. Ouch.

[mike_c]

11. I can't imagine spending even that for housing....

That's nearly three times what I pay to rent a nice, two bedroom house in a wonderful neighborhood. I mean, I can certainly understand paying more for more home if you can afford it. The thing that leaves me incredulous is that anyone working for hourly wages at the cable company could possibly afford that kind of monthly housing cost. One thing missing from the OP: what proportion of the family's monthly income was that original mortgage? Why did they think the adjustment would be affordable?

I just don't understand why ANYONE would go that deeply into debt for housing unless there simply are not any alternatives-- something I cannot believe was the case for these folks. I understand they are in distress and pain, and I feel sorry for them. I loath the greedy bastards who created this problem in the first place-- but we have to face the fact that blue collar folks burying themselves in unmanageable debt to buy a house they cannot afford certainly contributed to the problem, if only by agreeing to play the game of living WAY beyond their means.

[sandnsea]

12. Did you read the article? n/t

[mike_c]

14. yes...

...and that's why I acknowledged that my original reply was a bit off topic, at least relative to the OP's original intent.

I understand that the couple's daughter needed expensive medical treatment, but you must admit that the original article mixes issues a bit too much. The REAL take-home message is that health care needs reform so that folks aren't bankrupted by their childrens' medical needs-- yet the article chooses to focus on how finding alternative means of paying for medical treatment put these folks into foreclosure jeopardy. It's as though the author simply wants to write about the foreclosure crisis, even if the actual situation isn't really about the mortgage scams and greed that created that crisis.

But that wasn't the point of my initial response. I find the whole situation incomprehensible. Who in their right mind pays that kind of cost for housing in the first place, especially on blue-collar wages? Was this guy bringing home twelve to fifteen grand a month?

[sandnsea]

15. That's the circumstance people are in

It all meshes together. It isn't a simple straight line from bad mortgage to homeless. It's usually a mish mash of things. The mother also says she can't go back to work. Maybe when they bought the home she was working. Maybe he's a supervisor and makes better money. Their situation is medical bills, but somebody else's might be college or some kind of unfair lawsuit or care for an elderly parent - or all of it. I do not know why people around here think these things don't happen to people, all the time. They do to me.

[NashVegas]

32. Desperate People, That's Who

Welcome to the age of miracles.

[AnneD]

34. I understand your point......

I work as a School Nurse and have a decent salary and can pick up additional shifts. Hubby works as a security guard at the university hospital. Together we make decent money but housing prices and the mortgage payment is out of line with our budget. The houses within our means are a long drive from our jobs. We have opted to save our money and either pay a huge down or build ourselves. Rent is less than half of a home payment so we are pocketing the difference. There is a lack of affordable housing in many areas of this country. When a Nurse and Security Guard can't find an affordable home close to their work what does that say about a community. I left a rural resort area for the same reason-and they are crying for Nurses in rural areas-but you can't afford a place to live in many of them. I don't want a mansion-I just want an affordable roof over my head.

[mike_c]

38. yep-- at the height of the housing bubble, a couple of years ago...

...only 12 percent of the folks in my community could afford a median priced home here-- and this is one of the less expensive markets in the state! That's just plain wrong.

[AnneD]

40. I live in Texas.....

so it is better here than California, but Houston has gotten worse. I think we have more excess to wring out, hubby and I are waiting.

[Gormy Cuss]

29. What if you had your parents living with you and contributing?

The way the article reads I'd guess that the house belonged to the older parents and that some portion of their retirement income paid for part of the mortgage. The article also suggests that the mortgage was only 60% of the house's 2005 value. Both would factor in when approving them for the loan. I would also guess that the owners were planning to refi again but the illnesses of the parents and the tanking real estate market make that an unrealistic option now.

Nothing in the article suggests that the family took out the loan to live way beyond their means, unless you count medical care as an optional expense. These "blue collar folks" aren't unique in that choice.

As for the lender, it was flat out risky to issue a loan with these terms. A portfolio lender wouldn't have approved it. Securitizing it made the risk tolerable at the time.

[truedelphi]

13. Here's my story: (It will explain some of what went on with ARM deals)

In the year 2000, The husband remarks we should think about getting into the homeownership thing. We bat around the idea, and I don't like it.

At that point we are living in Sausalito CA helping out the elderly landlord and his wife in minor ways in exchange for $ 500 a month rent.

So I am less than enthused about the idea. I hate not having a mortgage deduction, but still...

Through the internet we find a house out in the Russian River area. It is $ 175,000. We somehow qualify -even though M is in school and makes about $ 20 K and I make a bit less than that.

I set up a meeting with the realtors. Keep in mind, this area of the world floods a great deal - and you are paying $ 175K for a house and piece of land that might not be habitable after the next winter.


I show up at the realtors. The house is closer to the flooding area than I was told. It is not my dream house, far from it.

M. never makes it - he has forgotten all about it. The realtors say, "No problem - you can have the house loan in your name. Besides, you don't really make $ 17 K a year - isn't it true you have a relative who gives you a hefty birthday gift <nudge nudge wink wink> and don't worry about it - We can make this deal look good for the bank."

So they are talking about a $ 1600 a month mortgage payment -at an adjustable rate of course. Shaking my head "No" with great fervor, I walk away from this "deal" feeling on certain levels pretty pleased with myself. M's school expenses meant that much of our money was not available for housing. Possibly I could have worked a second job but for how long before my health gave out?

Yet the realtors seemed to have all the answers. They called me for several weeks with other similar deals. I still think about those two guys every time the subject of ARM and the rate hikes come up.

The irony is that once upon a time, I had a real estate license. We were told to get the whole story, not just ask about the income. The whole story being - how much does someone have for housing? These realtors didn't know or care. They were gonna make it look good for the bank and get their commission and Caveat emptor and all that.

[MadMaddie]

27. From what I have read

Many of these people had planned to refinance their loans right before the adjustment. What many people didn't count on was a mortgage industry that tightened the rules on refinancing. Many Americans made the assumption or were talked into believing that getting a loan would always be easy.

This is one sad story among many happening every day...

[WriteDown]

3. Even at the original payment amount of $2370....

that is absolutely nuts for a blue collar worker(cable guy) to be paying.

[sandnsea]

6. That's what I thought too

What cable company is the guy working for anyway. That's about how much the cable company pays per month around here.

[David Dunham]

10. I agree. Why did the family take out such a big mortgage?

[Skink]

25. The cable companies must pay good judging by the monthly rates.

I swore off cable years ago. And am very frightened by the digital conversion.:scared:

[Warpy]

16. Wages haven't kept pace with the cost of living for over 30 years

and have been held down by manipulating the CPI market basket. There is no way people in major metropolitan areas with ordinary jobs instead of fancy careers can survive without taking on extraordinary debt, debt the financial industry was only too willing to extend as long as they could pass it on down the line to somebody else.

We aren't in a liquidity crisis, we're not in a debt crisis, we're in a jobs and wage crisis.

The economy isn't going to get any better until it's addressed.

[mike_c]

18. what she said....

Agreed, 100 percent.

[Trajan]

21. Yea verily ...

EXACTLY the problem ....

The loan terms are an issue, as is the specific circumstances of this family, but there is no doubt that INCOME STRANGULATION, so popular with conservatives who HATE US workers, is the primary constraint in today's economy ....

Even IF credit were available: We cannot afford any more debt ...

It is a complex issue, with so many different impacts from different sectors, but there is a bottom line: Families cannot afford to buy anything anymore .... Until their income picture improves, and the debt/income ratio is reduced, there will be no recovery ...

[fasttense]

23. Well put Trajan

INCOME STRANGULATION - a very descriptive term for what republicons have done these last 30 years.

[wartrace]

24. That's what make real estate "values" insane.

Housing should not have increased as it has with stagnant wages. Housing "values" are still overinflated. The median household income in the United States is around 45k yet the median home "value" is over 200k. If housing was in line with wages the median value would be around 112,500. Given enough time it is likely that we will get closer to the 112.5k figure..........

[Skink]

26. Amen!

I said can I get an Amen!

[MadMaddie]

28. Hey Skink I will give you an Amen!!

[WriteDown]

35. Well said but one mistake....

"There is no way people in major metropolitan areas..."

And people shouldn't if they can't afford to. I have too many relatives and friends who refuse to leave NYC because "everything is there" or "I can't get a good bagel or pizza anywhere else." I left over a decade ago and haven't looked back. Couldn't afford the 10K in property taxes let alone school taxes and everything else.

[Warpy]

39. I left Boston because I knew I could never afford to buy

anything but a slum apartment relabeled a condo and that property taxes on it would keep me in poverty.

However, I've regretted having to leave every day since I left in 1989.

Some people don't want to leave their homes. Their options are to rent or go deeply into debt.

Neither way leads to security.

Instead of patting yourself on the back for being such a superior intellect, why not start educating people on what the real problem in this country is: an anti labor, anti citizen government that has concentrated on beggaring us for decades?

It's more constructive.

[WriteDown]

41. Che?

I am supremely pro-labor, but I can't ever see a blue-collar worker making enough to own a property where school taxes are 20K. Sometimes you just have to leave an area when it becomes prohibitive to actually live there. My sister lives in San Fran in an apartment and earns over 200K a year. She loves it. My cousin and his wife live with his mother-in-law in a house on Long Island. They own no house of their own, but own a large ski house in Maine. I say "No Thanks!"

[BeatleBoot]

5. I have stuck with my Fixed Rate from 1993

Dumb, perhaps. I have been told to re-mortgage many times.

In January I think I will. For the first time. Ever.
And I will stick with a fixed rate loan.

And when my last employer went Chapter 11, then Chapter 7, I decided to keep my investments in an extremely conservative portfolio. Especially with the Retard in charge.

I have lost nothing.

I missed out on all of those gains since 2006, and all of those losses, too.


(Turtle v. Hare, 2008)

[sandnsea]

7. Their child has spina bifida

And has needed numerous surgeries. That's why they did the refi, for $375,000 on a home that was appraised at $605,000 at the time. Not so crazy considering the medical needs.

[notesdev]

17. The key question

is why get an adjustable rate mortgage rather than a fixed rate mortgage?

Whoever sold this product to them should be held accountable. ARMs are not for people who plan to stay in a home, they are for people who plan to move on before the reset.

[sandnsea]

19. That's why they get an ARM

That's exactly how they duped a lot of people into these mortgages, A LOT. You're young, you're going to be moving up to another home, take out this ARM. Your home has so much value, take out this ARM until you're ready to sell.

Nobody should get an ARM unless you're hoping interest rates will go down.

[notesdev]

20. But...

... these people pretty clearly stated that it was their family home, that they'd been in it for ages, and I see no indication that a plan to move was on the agenda when they refinanced.

So the question remains open - and it is really journalistic malpractice that this basic question is not answered in the article - why refinance in an ARM?

[sandnsea]

22. Medical Bills

It was probably the only way they could get the money they needed and still make a mortgage payment at all. People act as if they've never been in a situation where there were no good options.

[PassingFair]

30. Blue collar Spina Bifida children should just DIE.

And there by reduce the surplus population.

[doodadem]

31. Exactly

Ours wasn't medical bills, but an insane lawsuit with our idiot neighbors trying to steal our land. Our original mortgage was $800 a month. With 3 refinancing in 4 years, it got to somewhere around $2,800 a month. We tightened our belts, and we were making it. Then my husband lost his job.......and our health insurance......

Our farm went into foreclosure. I made enough money in my business to make up the payments, and pull us back out, but there wouldn't be much to live on. The bank finally came thru with an offer to reduce the payment back to $1,500, knock down the interest rate some more, and tack all the expenses onto the end of the mortgage. It also meant we could keep the other money to live on for awhile. What else could we do?

The outrageous thing--the stupid lawsuit is still going on, and we will never pay off the on-going attorney's fees. At this point, I'm saying look--you people need to start worrying about buying food and keeping a roof over your heads in the next Great Depression, not dicking around with this legal bullshit.

Think the judge (a Schwarzenegger appointee) cares?

[WriteDown]

33. Sounds like you need tort reform...

If you don't mind the question, what type of lawsuit?

[doodadem]

36. I've posted some about it before

It's basically a harassment suit, where the neighbors decided to make our lives miserable every way they possibly can. Their atty. brags about how he's not ever charged his poor old clients, while we have had to pay attys. to fight every frivilous motion he has filed. They have managed to steal part of our land, tried to close our access road, destroyed fencing to the tune of $10,000+ (which we are still having to make the payments on), killed our animals, poisoned our other neighbor's against us, libeled/slandered us, physical attacks, all manner of harassment, on and on and on. We've had multiple judges over the past several years on this case, and most have bought her poor little old widow act, as have the cops, and the County. Doesn't matter how much documented evidence we have of her commanding people much younger than we are (we're no spring chickens) to do her bidding.

We're already trying to figure out how we're going to come up with the money to file an appeal when this latest asshole judge gets thru doing his thing. He told our attys, of course off the record, that he intended to make sure we had to pay these people, even though he didn't think he had a legal basis.

The only reason we've hung in there, is that we love our farm. It's the most beautiful place in the world, and we bought it for peace, and quiet, and to retire on in a few years.

[WriteDown]

37. Sad....

I wish I could help you with that situation. I do hope it resolves in your favor.

The only change I would like to US tort law is if you lose a lawsuit that you initiate then YOU are responsible for costs incurred by the defendant. I've heard that is similar to what goes on in Great Britain.

[doodadem]

42. Ehh....Not so fast

We actually had to initiate the original lawsuit, because the neighbors decided they were going to try to close our access road, purely out of spite. We had to sue to prevent that, even though the road had been in continuous use for more than 100 years, and was the only entrance to our property (the original owner of our little farmhouse owned all of these properties).

So, again, purely out of spite, these people filed multiple other actions against us, and again, that they are not having to pay for, per their atty. That's what he's been hoping for all along, is to try to make us pay their atty's fees, even though they aren't paying him, plus get all kinds of "damages" and so forth. He has said outright that his intention is to try to bankrupt us. It's been a complete farce, with people who feel no qualms about perjuring themselves, and a far longer story than I can go into here.

Yeah, the justice system totally sucks here, especially when you get a judge who has already made up his mind about you before he ever hears the first bit of evidence, and then plays, "don't try to confuse me with the facts."

[SOS]

43. Pass a law that resets all mortgages at 4.5% for the next two years.

Problem solved.

But since our Congress is nothing more than a bunch of pathetic Wall Street lackeys, it'll never happen.