Foreclosure's shadow falls across diverse set of US homeowners

At the housing boom's peak in 2005, 20 percent of new mortgage loans were subprime, four times the share a decade earlier.

from the April 9, 2007 edition

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Indeed, subprime credit washed through suburban communities as well as inner cities.

Jenison, Mich., is a case in point.

The town, near Grand Rapids, is the place Mary Beyer has called home for 20 years. Her home is modest. But now she is paying dearly for every one of its 900 square feet. Divorced and living on a fixed income, she saw refinancing as a way to bring her budget into balance four years ago.

Although the "refi" deal provided some cash up front, it depleted her equity in the house. Her monthly payments went up. Her troubles deepening, Beyer called her mortgage broker for help. The result: another refi. Then another with a different lender. Then another.

"If I could go back ... ," she muses, recalling the $600 monthly payments she owed in 2002. After four refis in four years, Beyer says she is left with no home equity and a monthly payment that outweighs her whole income. She feels duped by the lenders and is filing a lawsuit with help from Legal Aid of Western Michigan.

She hopes other homeowners can reap some cautionary wisdom from her experience.

"When [you're] not thinking plain and when [you're] desperate, don't make any quick decisions," she advises. "That's when they're going to nail you."

Al Ynigues, a music teacher, also lives in suburban America, in the community of Apple Valley on the outskirts of Min-neapolis. He found a home to buy in 2004.

"It looks like the presidential White House. It's got those colonial columns in front," he says. What he likes best are the rooms inside for his music business – one for teaching percussion, one for piano, one for doing recordings and repairs.

What he likes least is his mortgage arrangement.

His interest rate began moving up last fall, two years into the loan. Meanwhile, his income is now a bit lower than when he bought the home. He had wanted a fixed-rate loan, but the mortgage broker steered him toward an adjustable.

"I was gullible," Ynigues concedes in retrospect. He says he learned later that the broker reaped $5,000 in a kind of kickback, called a "yield spread premium," from the finance company for generating a high-interest loan.

In March, he testified on Capitol Hill, urging Congress to take action to protect future homeowners from predatory practices. With the help of Acorn, an advocacy group, he hopes to modify his loan and keep the house. Many lenders will consider reducing an interest rate, for example, if doing so will save them the cost of foreclosing on a property.

"It's a beautiful home," Ynigues says. "I want to stay."

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