Earlier this week I stumbled across a story on CNN Money about a New York woman and her family. (Read the full story) She made $25K a year, but with good credit and a $20K downpayment managed to receive a no-doc loan to purchase a $489K home. With a $4100 monthly mortgage payment, her real estate agent told her she could refinance her ARM within two years to lower her payment. Her two adult daughters, who lived with her, paid a combined $3K towards the mortgage while Mom paid the rest. About a year later when the ARM adjusted the payments increased by $300. Because the family was already stuggling the increase proved to be too much to handle.
I have several issues with this. Why was the mother able to buy such a home in the first place? Since there was a discussion about refinancing early on there were obvious concerns about affordability. So why was she able to proceed with the transaction? Did her real estate agent truly work in her best interest?
The story goes on to say that the lender wouldn't work with her to modify the terms of her loan. Because of interest and late fees she owes over $130K more than the house is worth. Therefore a short sale would be difficult. From the bank's perspective this is just plain ridiculous to me. They would rather receive nothing every month as the house stands empty than get something from a family that truly wants to stay in the home? Sounds greedy.
There was a news story somewhere else, and I can't recall the source, that talked about a woman who was late paying her mortgage after having to return to her home in the UK for a family emergency. When she returned to the US and tried to pay over $8K to catch up the bank refused the payment and began foreclosure preceedings. Now, the story didn't say how late the lady was, but I got the impression that it wasn't by much - maybe a month. Regardless, would you turn down an $8K check? Again, sounds greedy.
I'm tired of seeing stories like this day after day. It saddens my heart to see people lose what they've worked so hard to achieve. Sometimes the lost is due to poor choices. Sometimes the lost is due to corporate greed. But who are we to judge?
What are your thoughts?
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