Foreclosures rising among high-risk US mortgages
Loans made to people with weak credit during the housing boom have pushed more than 20 companies into bankruptcy.
from the March 2, 2007 edition
Page 4 of 4
Ms. Myers is also coping with mortgage sticker shock. As sales director at a Colorado golf course, her commission-driven income depends on weather. When she got her no-down payment loan last spring, costing $2,200 a month, the weather was good and she was bringing home as much as $6,000 a month. When snow came early to Denver, the golf course closed, and her monthly income has plummeted to $2,200 – only enough to cover the mortgage and nothing else. She's maxed out her credit cards and borrowed from family to make payments over the last few months. Her March payment is now due and she only has $1,000 left in the bank.
"They won't take a partial payment, and they say they won't work with me until I've been 60 days late on my mortgage," she says. "I've never been late before, and I don't ever remember being in a financial situation like this before."
Ms. Smith nearly lost her St. Paul house to foreclosure. A retired social worker on a fixed income who is raising a grandson on her own, she had no intention of refinancing her 30-year fixed-rate mortgage. Then her insurance company said her old house needed structural repairs – and it wouldn't issue a policy until the work was done. That's when a mortgage broker came around. He told her he could get her an adjustable-rate mortgage that would allow her to take out equity to pay for the repairs without increasing her monthly payment too much – at least for the first two years. When she asked what would happen after the two-year "teaser rate" was up, the broker told her she could just refinance again.
"And voilà, at the end of the two years, I get this slap in the face – they start raising the interest rates every few months and said, 'No, we're not going to refinance,' " she says. Eventually, her payments doubled to more than $1,400 a month. "I told them I don't make $1,400 a month," she says. "'Tough,' they said, 'It's just too bad.' "
Eventually, the lender started foreclosure proceedings. Smith then contacted ACORN, the national housing organization, which negotiated a new fixed-rate loan for her. But her payments are still more than $1,300 a month and she's now working as many part-time jobs as she can find.
"I hate for anyone to find out that I was this stupid, that I could get caught up in something like this," she says. "The sad thing is that I'm not the only one. There are thousands of people that this is happening to."
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