The mortgage crisis hits home-Alisa Valdes-Rodgriguez
(The Dirty Girls Social Club, Playing With Boys, Make Him Look Good, Dirty Girls on Top) It speaks to a very personal side of the current financial crisis we face.
THE MORTGAGE CRISIS HITS HOME
(Not exactly my ex-house, but close enough.)
There are two things my father wishes I would never discuss on this blog. My love life, and my finances.
I'm cool with avoiding my love life. Not much to report there. I hope it stays that way.
But with finances, I feel obligated to speak up. But before we enter into that discussion, visit this link to understand what happened with the mortgage industry to cause the current situation.
Got that? Okay, good.
Now, my situation, and how it is impacted by all of this. A little more than a year ago, I bought a four-bedroom tract home with a pool, in a very nice subdivision in Scottsdale, Arizona, for $570,000. It was the most I'd ever paid for a house, and certainly much more than a similar house might have cost me back in Albuquerque. Still, we hoped the gifted school thing would work out, and, according to conventional wisdom at the time, felt that buying was better than renting, even if we left after a short time, because of the tax benefits of interest paid on a mortgage.
I put $120,000 cash down on the house, thinking it was safe there, and might even grow. I figured it was a good investment because that's what people like Suzie Orman used to say, until, like, last week. Arizona was said to be booming, and the mortgage, while steep, was something I could handle, thanks to my supportive and loyal readers and other assorted sources of income.
Fast-foward to this summer. The gifted school thing has not worked out. We do not like Phoenix and Scottsdale very much. We are homesick for our friends and family in New Mexico.
I am up to date on my mortgage payments, but all around us houses are going on the market at slashed prices, being abandoned, or coming up for lease. The prices begin to drop drastically, as homeowners in our area see their shady loans balloon out of reach and they lose their homes to foreclosure.
Suddenly, the house I bought for $570,000 is worth...$380,000?!?! Amazing! I know this because it is a tract division, and that is the price the same model is going for right now. And dropping with every week that passes.
What this means is that I, as a responsible homeowner, am now paying a mortgage of $450,000, on a house worth $380,000 - and the price continues to drop. By this time next year, I would not be surprised to learn this house is worth $310,000, or less. I have lost every penny I put down, and am now, astoundingly, in negative equity, which grows only more negative with every payment I make. Does this make sense to you? Not to me, either.
I never thought I would be the type to end up in foreclosure, but last month I made the decision to stop paying my mortgage. To just walk away. Not because I can't pay it, but because it is foolish to continue to do so. I am aware of the new FHA program designed to refinance homes like mine at their current value, but I don't think the dropping prices are going to bottom out for a long time. It's just not worth it, either way.
I attended a foreclosure workshop sponsored by the state of Arizona, to learn about the laws, and realized that by simply walking away from this disaster of a neighborhood, city and state, I could save myself a lot of money and heartache - at a heavy price to my FICO score.
One of every three dollars in Phoenix is tied up in the real estate development industry, which has all but ground to a screeching halt. The local economy is tanking. Things will not get better for a very long time, if they ever do.
So, couple weeks ago, I put the house up for sale, and closed my checkbook to my lender, forever. Screw 'em.
It took me a while to get over the good old puritanical guilt about that, but I'm done. I'm not feeling remorse for looking out for myself and my family. The government is bailing out the bankrupt lenders, including my own. But who is there to look out for people like me? No one. That's who. No. One.
The conservatives will try to tell you this crisis is only impacting irresponsible homeowners, who got into mortgages they could not handle. Wrong! If you own a house in any of the areas hit hardest by this thing, you are wasting money if you continue to pay for a worthless property. Many of us realize this, and we are walking away, mailing in the keys, saying "thanks but no thanks for this bridge to nowhere.
"It was not easy to come to terms with this, to realize I would never recover that money. But once I did come to terms with it, I felt free, in charge of my own destiny and wallet. I was ready to walk away from the house, to propose a deed in lieu, or to foreclose if needed.
As it stands now, I have an offer on my house of $405,000. That is $50,000 less, roughly, than I owe on the loan. This means I will have to ask my lender to give me a short sale, even though they - the lender - will still turn a significant profit on this property. Does that seem fair to you? No? Me neither. But there's not a damn thing I can do about it.
Assuming my lender accepts the short sale - and I imagine they will, given the situation, but won't know for sure until next week - I will suffer a pretty terrible blow to my credit rating. It could drop as low as the high 300s, which means I can't get any kind of loan for at least three years.
I am prepared for that. I am not happy about it. After all, the bank loaned me $450,000 - and will end up making $600,000 on the deal, from my down payment, a year-plus of on-time mortgage payments, and the home sale for $405,000. But I will still be penalized. Make sense to you? Me neither. But oh fucking well. The system is broken, and no one but Barney Frank seems to give a shit about people like me.
So, think about this. I played by the rules. The banks did not. And, here I am, not only losing a massive amount of money, but being punished on my credit report for a housing transaction that, in the end, makes money for the lender. Twice. Because the lender will not only get my money, and the new owner's money, but also a bailout from the Federal government, at taxpayer expense, because it is impossible to put an exact value on the losses, so the Fed is just guessing...at $700 BILLION.
Not fair? Damn straight it's not fair. But I am quickly learning that very little in he deregulated wild west of Milton Friedman "trickle down" economics is fair. It's nothing but gambling with rich liars, who, as we might have guessed, don't have much interest in letting any of their coins trickle anywhere. And here I was, lecturing my in-laws on their casino habits, when I did not know enough to see the fireball headed my way.
But I am ready to suffer the consequences, because I have decided that, unless I can buy a thing in cash, I am not going to buy anything anymore. For the amount I paid on this house in the past year (the $120,000 down, plus about $50,000 in mortgage payments) I could have purchased a home in cash on the West Side of Albuquerque, and never had to worry about anyone taking my home from me again.
So it is that I've decided not to wait this out (it will be years before recovery, if one comes at all), and to move all of us in with my pops, who owns his home outright, for the next three years or so. Each month I will make a check out to myself, to my savings account, in the amount I would have paid on the note for my house in Arizona.
Within a few short years, I will have enough money to get us a little house somewhere. In cash. Maybe in a country with a healthy economy. It feels good to have freedom again, even if the lender and credit agencies are stealing my money and stabbing me in the back for it. Such is the life of an escaped slave.
I suppose I am learning, at a micro level, what the banking world is learning at a marco level. Don't spend money you don't have. Live frugally and intelligently, and remember that people matter much, much more than things.
The bonus of all this, if there is a bonus, is that I have learned that stuff is just that. Stuff. Family is what matters. And I feel incredibly fortunate to have a family willing to take me in while I make this transition, and begin, once and for all, to accumulate real wealth instead of shadow money and the appearance of prosperity that have sadly become the American way.
I know it's a drastic move. But those of you who know me understand that I am all about the drastic move, when it makes sense. I am not afraid to be out of step, if it makes sense to be such. I am the woman in the Latin aerobics class at the gym last night, who insisted on doing the 8-count routine starting on the 1, even though the rhythm-deaf, unqualified instructor kept mixing up her beats and counts, starting on the 2 here, and the 5 there.
Everyone else in the class followed the instructor, because they, sheep at heart, surely thought she was right and they were wrong, even if her moves didn't match the beat and instinct told them otherwise. People are too damn polite sometimes. Sometimes, you have to be upfront and honest. You have to trust your instincts. The others in that class were too polite to be free-thinkers. Same with many of my neighbors, who will keep on paying these thieving banks money they will never get back, exorbitant rent to an undeserving landlord.
Not me. Hell no.
I will stand there and look a fool to the actual fools, doing the right thing because I have actually thought about it. I have never worried about looking smart to other people, and I'm not about to start now.