Posted on 07/05/2008 4:12:22 AM PDT by Timeout
Vicki Miller bought her childhood home in Altoona, Pa., from her mother's estate for $32,000, using a nice, traditional mortgage from the local savings and loan.
Seven years later, her debt has more than doubled, her once-significant equity has shrunk to zero and she's behind on her payments. The lender has begun to threaten foreclosure.
(Excerpt) Read more at latimes.com ...
Miller had been in the house for 3 years before the first refinance, running up $15,000 on credit cards...$5k a year. Then she refinances, takes $23,000 out of equity, and "her monthly payment nearly doubled to $559". This implies that her new monthly payment increased about $269....$3228 a year. That's LESS than the $5k a year she had been over spending in the previous 3 years. So her problem wasn't the mortgage...it was that she was living beyond her means. The $15k debt was the first sign that she never could afford the house. She also admits she didn't read her mortgage documents, then she takes out two second mortgages, and finally refinances again..taking out another $5k of equity.
As one reads the article it becomes clear that she maintained approximately the same (over) spending level throughout the time she owned the home. She simply couldn't afford the house...even if she had NEVER refinanced.
Yet we're offered such tales as evidence of the bad ole mortgage companies and proof that we need the government to step in and "protect" people like Ms. Miller.
It's a sad story. But it is NOT what it's purported to be: the story of a hapless victim done in by unscrupulous lenders.
That's exactly what it is, and a mortgage "bailout" bill simply means the government robbing even more from those who were cautious with their money and bestowing the ill gotten largess on those like Miller who were irresponsible or lazy. Just one more instance of wealth transfer from those who earn it to those who vote for it. Like it says in the Declaration of independence "From each according to his ability to each according to his need" Oh wait, it doesn't say that - that's from Karl Marx
It’s not the HOUSE she couldn’t afford - if her payments doubled to $559/month, that means they were $280 before. Unless you’re living under a bridge, you’re not going to get much chepaer housing than that. When I bought my house, I had less than 30K income, and the payments were around $600. I did without a lot of things to make those payments. She chose to rack up her credit cards instead.
Part of the drive to hype up this crisis is to play lose with the facts, and call folks owners who really aren't .
Another example of a person who uses their homes equity as an ATM machine.
There is no question that a lot (and I mean a lot) of people refinanced or took second mortages to pay their credit card debt and/or to obtain cash to make additional purchases. Those loans had nothing to do with their home, except to use it as a vehicle to support other spending.
I'm not so sure about that. The bank having a lien on a house doesn't make them the owner. If they truly where the owner they would have certain rights, such as housing more people in your home, for example, or evicting you for any reason or for no reason, or subdividing your land. They can't do any of that.
Besides, when you rent you never build equity, which is certainly not the case in a traditional mortgage.
There are legal definitions of what is rental and what is ownership.
She made $26,000 a year. Her monthly payment became $559.00. This is pretty much exactly where any financial advisor would say it should be - a week’s pay. Her mortgage of $60,000 amortizes at $508 (30 / 9%) so the property taxes were included in the payment.
Then there’s the other $8,000. She had $15,000 in credit card debt from “repairs.” She financed an additional $23,000. What happened to the other $8,000?
She took out another loan for $13,000 to replace the roof, and a shingle roof on a $32,000 house does not cost $13,000. It should cost around $3,000.
Then she dumped $5,000 on new windows to “save energy.” I recall that curtains did the same job for a lot less than $5,000.
We are now up to $41,000 on repairs for a $32,000 house, and about $8,000 of it was the roof and the windows. The other $33,000 (more than the cost of the house) has gone missing. Where did it go, Ms. Reynolds, the clever L.A. Times reporter?
She would ask that question if it was a republican.
“Home owners hold the title to the property.”
Good point. And even if you pay off the mortgage and think you “own” your home, if you don’t pay your taxes, the government will auction it off on the courthouse steps. So you never really “own” a home in America.
While politicians cast the banks as heartless lenders at their msm-generated hearings, the government is the cruelest master of all, and it is not about to give up its power to take your property.
And I don't think you have to be particularly "mortgage smart" to guess that a bigger mortgage is going to have a bigger payment.
I guess I'm some sort of special person. In the 20 some years since I bought my house I have borrowed against it exactly zero times. Yeah I get those leaflets in the mail all the time, but nobody has ever held a gun to my head and made me do anything with them.
This is an astounding statistic--90% of the sub-prime loans were simply adding to existing mortgages.
Living beyond your means requires ignoring reality such that solving this problem also ignores reality. Between bailouts and BHO this will take longer to settle, but it will settle. Debt, like sin, is often worse than one thinks.
(Vicki Miller at her Altoona, Pa., home with her son Justin Clark -- on the day of the 18-year-old's senior prom -- and Justin's father Donald Clark. Miller is struggling to stay in the home after a series of refinancings.)
Does Justin's father live there too?
This is a story that struggles to tell us how unfortunate Vicki has become at the hands of the criminal usurious money lenders who have ruined her pitiful life.
That's exactly my point. It doesn't matter whether she borrowed the money on a mortgage or on credit cards. And it doesn't matter whether she was using the money to maintain the house or dribbling it away on other things.
She overspent for 7 years and now she can't pay her bills. (I love the way they try to excuse her overspending. $5k for energy efficient windows....and then they say she can't pay her bills this winter because her heating costs were so high!)
Even if we take the reporter at her word and assume ALL the overspending went to NECESSARY home maintenance, that simply underscores the point: she couldn't afford to live in that house. And that's the charitable view. Like you, I presume she wasn't just spending on home repairs. Too much money unaccounted for.
Let's see. An industry (housing) runs around and tells everyone within earshot that "homes never decrease in value". That "equity is as good as cash". That "you can take money out of your home". That same industry (backed by politicians of every stripe) makes it easy to do the above and through those politicians makes it harder to use the right of bankruptcy.
But. They are not to blame. It's just the stupid Americans who believed all that stuff - the have no one to blame but themselves.
Remember, only trained speculators should be allowed to speculate. No one else. The rest should just sit by and watch the chosen few make money on paper.
In fact, that’s an interesting angle I wish I could get the reporter to answer:
Suppose Miller had run up an additional $50k in credit card debt rather than mortgages. Would the LA Times have run a story on voracious credit card companies? How irresponsible (and stupid) does a person have to be before the MSM holds them responsible for their self-created misfortune?
The lenders are slowing down though, there was a long period when I was swamped with offers trying to loan me money on my paid for house, credit card offers galore too. They have slowed down noticibly.
Not one damn necessity in the whole of the lot.
Nevertheless, we've been friends for almost 30 years. Their problem...not mine.
‘Zactly.
Which works wonderfully in a climate of rising values and declining interest rates. Payment stays stable, cash out every so often; we've done it. But it does not work when values decline and rates rise, and you can't overdo it.
As an Automated Teller Machine machine?
“Another example of a person who uses their homes equity as an ATM machine”
Exactly. Something also missing from the story, did the husband have no income?
Home “owners” don’t own their properties, they rent them from the government. Ownership reverts to the real owner - the government - if you don’t pay the rent, called “property tax.” With a TV, once it’s paid for it’s yours, but not land, which forever remains property of the Sovreign.
Another example of “assignment” journalism. This quarter-wit writer obviously is incapable of an initiative story of her own.
thank you...
Almost everyone we know did that. We have not taken 1 penny out of our home that we bought 11 yrs ago with a 15 yr loan. We are the only ones I can think of now that are ‘sitting pretty’ in the housing mess.
OK... but society (taxpayers) shouldn't have to pay 'cause she was stupid.
Heads up to reporters and congress critters...I need a plasma TV. And it's everyone else's fault if I overspend to get one.
LOL! I should write the reporter and ask her what she would have considered NOT worthy of victim status. I’d like to think a plasma TV wouldn’t fall in there, but I’m afraid to ask.
It’s like the WaPo editorial I just read scolding the GOP for saying Obama raised taxes 54 times. As they oh-so-carefully point out, the taxes he raised were TO PAY FOR GOVERNMENT PROGRAMS.
Ipso Presto: not really a tax increase. LOL!
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