Mortgage Crisis now Mainstream

Wow - you know things are bad when the mortgage crisis makes the cover of parade magazine. The article is titled What Your Home Is Worth. While the article has some interesting quotes from alot of the usual suspects, more interesting are the five features on Where America Lives and the issuing facing them. The real stories from real people are more compelling than the quotes from the experts. Here are some of the featured stories -

Retiree Daniel Gavagan, [of Zeeland, Mich.] 57, paid $145,000 for a house in 2002 with money he earned from working 31 years in a GM plant. He sank an additional $50,000 into improvements. Happily, the appraised value ballooned to $210,000 in 2005, so Gavagan decided to sell the house.

But at the same time, Michigan real-estate prices crashed. Gavagan lowered his price to $198,500. Today, he’s asking $169,500—just enough to cover his note and pay the Realtor. The improvements he made amount to a gift to the next owner. “If people haven’t got the cash, it doesn’t matter what you do to the house. I thought I would make $12,000 on it,” he says. “But that’s gone. I’m way upside-down.”

Couple points - now upside-down on the mortgage is a mainstream term. Also, the article states that he was the house because the house appreciated so much - even though the house was $145,000 - plus the $50,000 improvements and during the peak of the bubble he was going to sell for only a $12,000 profit. It does not explain why he is still trying to sell the house even with the loss. Very interesting and alot more to the story. This would appear to be a perfect candidate for waiting it out.

Here is a story of a family on the brink-

To accommodate their growing family, Joe and Suzanne In June Dinmore [of Franklin, Mass.] converted their fixed-rate, 30-year mortgage to an adjustable loan to pay for a badly needed expansion. Then the monthly interest rate jumped beyond what Joe could pay on a teacher's salary. The bank refused to modify the loan, and the house was scheduled for auction. At the last minute, a national homeowners' advocacy group helped secure a new, fixed-rate laon. But the deal collapsed when the lender piled on back payments and penalties. "We thought we were saved," said Joe, "but now we might still lose everything.”

The family has six children and may still end up in foreclosure. But there still is a chance they could work things out. Unlike like the following called We had to walk away -

Keith and Debbie Parker [of Merced, Calif.] turned their house over to the bank when their adjustable-rate mortgage soared well beyond their means. “The house is worth $170,000 less than the loan, so we couldn’t sell,” Keith says. “My two kids were devastated, and my wife lost more than half of her daycare business, which she ran from the house.”

The family rented a nearby house. While Keith may be out of debt, his credit is ruined. “It’l l take me years to get back in the game,” he says. “But for now, we’re still eating.”

This last story does not provide enough information to see if they were walking away from a house they could afford but was underwater or walked away prior to imminent foreclosure. Those are two entirely situations. Since the article states half of the daycare business was lost and the mortgage was above their means, it was probably the later - imminent foreclosure.

There were two other stories featured - one about a couple that bought their house at a bargain and another that was able to have their unaffordable ARM converted into an affordable fixed-rate.