By Elizabeth Cook
Salisbury Post
I can’t put a name or a face on the foreclosure crisis, but I can share a voice.
A Post reader who recently lost her home through foreclosure sent me an account of her family’s experience, but she’d rather not be identified.
She made her bed, and she’s sleeping in it, but she’d rather not add a lump of public embarrassment to the situation.
So why not just stay quiet? She and her husband (whom she refers to as “Ted,” not his real name) learned a lot during this process, and she wants to share her story ó a cautionary tale for those who may be on the verge of making some of the same mistakes.
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“I lost my home to foreclosure,” she says. “The reason, my stupidity.
“The blame can’t be put on anything else. When lending institutions began allowing loans on home equity, and the government allowed the only interest deduction to be for home mortgages, I began making asinine decisions. Like borrowing money on my home to pay income taxes. Like borrowing money on my home to buy a business. Like borrowing money on my home to remodel …
“I do not want sympathy, nor do I feel like I deserve it. The reason I am writing this is to let people know what happens in foreclosure, how the government makes money on foreclosures, and to let the public know how the mortgage companies will not help those in crisis.”
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She and her husband moved into a used mobile home when they got married, and they had it paid for in five years. They were happy not to be wasting money on rent.
The birth of their child brought the need for more space, so they built a house. Unfortunately, interest rates were at an all-time high at the time. The best deal they could get was 14 percent. (Yes, there was such a time.) Still, the closing price on the house was $41,000, and the monthly $465 payments were manageable for two blue-collar wage earners.
Then they tried a brief stint at being business owners. They borrowed money on their home to make a down payment on the small business, and took out other loans to buy it.
When they decided to sell the business, they paid off the loans with proceeds from the sale ó all the loans, that is, except the equity line of credit on their house. In fact, they borrowed more to pay the taxes on the sale and to remodel their house ó one of their many missteps.
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“Then disaster struck,” she says. “Ted became very sick and could not work. The payments on our home were getting more and more difficult to make.”
People who have been through a major illness know what comes next ó going from doctor to doctor and getting bill after bill only to find no real cure for what becomes a chronic condition.
After nearly a year, Ted found a job where he could sit most of the time. But the downward spiral had begun.
“In order to help with catching up on our bills and the mortgage payments, we borrowed again on our home.”
But the bank would not loan them the money ó would not let them go further into debt.
“This time, we went to a mortgage company. Big, huge, gigantic mistake! The interest rate we received was a whopping 9 percent. Our home was appraised at $145,000. Our monthly payment was $1,100.”
When the prime rate increased, so did the interest rate on their new mortgage, and before long they were paying $1,600 a month.- – –
Rather, their bill was $1,600. They couldn’t pay it. After receiving several calls and letters, they were notified that the house was going into foreclosure.
To make a painful story short, they sold their house for $36,000 less than they owed ó a”short sale,” such a transaction is called ó which the loan company accepted.
“The foreclosure was still processed, but we were out from under the predatory loan.”
That was a relief.
They were also out of the house where so many of their family memories had been made. That was a heartbreaker.
Oh, but there’s more.
They were surprised to find, come tax time, that Uncle Sam counted their $36,000 forgiven debt as taxable income. Their total income tax bill that year came to $9,500.
“So, the IRS had profited from our loss,” she says.
This has been a harrowing experience for the couple.
“Ted is the one who suffered the most. His condition remains the same. He had to be hospitalized in October of last year due to an emotional breakdown. The long wait for disability, the loss of our house and our financial instability was too much for him to bear.
“My son, well, he just misses his home.
“As for me, the foreclosure took its toll. I’ve had the ‘Great American Dream.’ I hope one day to have it again ó the one like before, the one with the front porch and the white gingerbread trim.”
You never know what goes on in other families, and for good reason. Money is a private matter. So, privately, there’s a lot of sorrow and regret running through families who have experienced foreclosure. At least this woman isn’t trying to put the blame on someone else. She made mistakes. Maybe some day she’ll get a second chance.
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Elizabeth Cook is editor of the Salisbury Post.