Posted on 12/04/2006 1:47:48 PM PST by RobRoy
The problem isn't confined to urban areas — families in well-off communities are finding that a risky mortgage and some bad luck can put a home at risk.
Pam and Nathan Weisel live in "The Preserve," a freshly painted subdivision carved from the farmland in Norwood Young America, Minn.
For now.
Three months late on their mortgage, with a foreclosure notice in hand, the Weisels and their six children don't know how much longer they can call The Preserve home. The couple was hard-pressed to pay their $1,841 monthly mortgage after Nathan lost his sales job and health problems kept Pam, an office manager, out of work. They fell behind even before the interest-only period on their adjustable-rate mortgage expired and their payments jumped — a payment shock expected to hit millions of families next year.
While Twin Cities foreclosures have been most concentrated in lower-income urban neighborhoods such as North Minneapolis and St. Paul's East Side, they're rapidly becoming a suburban problem as aftershocks from the nation's housing boom roll across the economy. Even sparsely populated, relatively well-off Carver County is not immune, as homeowners struggle with a toxic stew of factors including stagnating home values and mortgages laden with risk.
At least 88 homes in Carver County had been auctioned off in sheriff's sales by the end of October, up from 81 for all of 2005. The big stone sign in exurban Norwood Young America announcing The Preserve may connote sanctuary, but the burbs are as shaky ground as any for homeowners these days. The Weisels are a textbook case of real life colliding with unreal mortgage.
"I've watched everything he and I have worked so hard together to accomplish … I've watched everything go down, down, down right before my eyes. It breaks my heart," said Pam Weisel, 36.
The surge of foreclosures is still so new that experts have not formed an opinion about the suburban trend, other than that foreclosures are now cutting across income groups. Allen Fishbein, director of housing policy for the Consumer Federation of America, said that the higher home prices in suburban and exurban areas could play a part.
"People on the whole were probably stretched further and on thinner ice to buy these suburban homes than you would see in the inner cities," Fishbein said.
The trouble started pretty much as soon as the Weisels bought their house last year. Married four years ago, they had been renting but needed more room for their big blended family, and they yearned for something to show for their hard work. With four bedrooms and a spacious back yard, 569 Preserve Blvd. fit the bill. Pam, a native of Houston, jokes about being the hillbillies of The Preserve, with all their children rambling about, plus two dogs and a cat.
Divorces left them both with blotchy credit. But Nate had a solid sales job with a well company that paid as much as $55,000 a year. Child-support payments and state assistance for raising Nate's half-brother, as well as one of Pam's ex-husband's children, gave them a temporary income boost.
A nontraditional mortgage — a key culprit in the nation's surging foreclosures — took them the rest of the way.
To get the Weisels into a $278,000 house, their mortgage broker steered them to a zero-down-payment, interest-only adjustable-rate home loan — a type of loan heavily marketed during the housing boom as a way to make expensive homes affordable. The Weisels avoided the extra cost of private mortgage insurance by getting a so-called 80/20 loan — two different loans that equal 100 percent financing.
Pam acknowledged she didn't carefully read all the documents and hadn't fully realized that for the first two years, they would pay just the interest on the loan, and that the interest rate would reset this coming spring. They placed far too much trust in the broker, she said.
"As an accountant, I feel kind of stupid at this point," Pam said. "If you kind of place all your trust in somebody, and you think they're doing everything they can to help you and are looking out for your best interest, you're not sitting there picking it apart." Disaster struck almost immediately.
Within months, Nate lost his job and Pam learned she had a large tumor lodged between her heart and her lungs on her thymus gland. The tumor had grown to the size of a softball by the time surgeons opened her chest last year to remove it. Against all expectations, it turned out to be benign.
"The doctor said, 'I don't know who you prayed to, but he really likes you,' " Pam said.
The financial gods were not so generous.
Insurance covered the medical bills, but Pam only recently has been able to look for work again. Nate landed a job in car sales at Jeff Belzer's dealership in Lakeville a few weeks ago, but the commission-only position isn't bringing in much yet. Some house payments went on their few credit cards. They borrowed money from family, and their church, Living Rock Church, has paid big bills and bought groceries. A few weeks ago, the Weisels held a garage sale to try to raise money, but some of the big-ticket items — a 55" Sony high-definition TV, living room furniture and even Pam's wedding ring — didn't sell.
Some help even backfired. Nate's mother took out a home-equity loan to buy the family a reliable used Suburban, but the vehicle put them above the asset threshold, disqualifying them from food stamps in Carver County, Pam said.
For the first time in her life, Pam tapped food shelves. "I've always been able to stand on my own and never really needed help from anybody," Pam said. "I had to go ask for one of the most basic needs."
There have been times, Pam said, she's fed the family with the only thing she had left in the house: a bag of rice.
"The hard part is trying to look strong for everybody else," said Nate.
And so the Weisels are preparing to move back to Houston, where housing is cheaper and Pam's family can help. But just in case there's a shot at righting things, she's filling out paperwork detailing their assets and their liabilities for Louise Setterquist, a foreclosure-prevention specialist in Carver County. The Weisels' mortgage is like many she's seen, said Setterquist, a no-nonsense counselor with Carver County's Community Development Agency. Most of Setterquist's clients have mortgages of $200,000 to $300,000. Most are adjustable-rate mortgages, and most are subprime, the higher-interest loans made to people with blemished credit.
Setterquist wants to see the Weisels' big financial picture before she advises them.
"I want pay stubs and a budget to see if there's even a discussion (about avoiding foreclosure) here, or I'm going to tell you to sell," Setterquist said. Packing for Houston is a scary thought for the children. Leeann, Pam's 14-year-old daughter, said leaving her friends behind will be the hardest. As for Pam, worn out from the struggle, she's ready to live on a farm "in the middle of nowhere."
Jennifer Bjorhus can be reached at jbjorhus@pioneerpress.com or 651-228-2146. IS YOUR HOME AT RISK?
If you are facing problems making your house payments and need advice, contact the Homeownership Center of Minnesota at 651-659-9336 or go to www.hocmn.org and click on "foreclosure prevention." Or call the Homeownership Preservation Foundation's toll-free confidential hot line at 1-888-995-HOPE to speak with a counselor. Or go to www.Hud.gov, click on "talk to a housing counselor" and click on Minnesota. Weisel family members include, from left, Stephanie, 11; Pam, the mother; Leeann, 14; Jessie, 11; and Nathan, the father. "I've watched everything (Nathan) and I have worked so hard together to accomplish … I've watched everything go down, down, down right before my eyes. It breaks my heart," said Pam Weisel, 36. HOME AT RISK? If you are facing problems making house payments, contact the Homeownership Center of Minnesota at 651-659-9336 or go to www.hocmn.org. Or call the Homeownership Preservation Foundation at 1-888-995-HOPE. Or go to www.hud.gov.
>>Some house payments went on their few credit cards. <<
I'm guessing that "few" is more than "two".
I am thinking they will try to include that in the bankruptcy.
Actually, my sympathy goes out to these guys. I would just really like others to learn from this.
The overpriced home. The big tv. the multiple credit cards.
What they should have had instead was a "starter" home and a lot of savings/investments.
There is a reason my heart goes out to them. In a 21st century way, they are me when I was their age. But you can get into far more trouble, and quicker and easier than you could back in the day.
Oh, come on; we can vent a lot of pent up anger on that one........LOL.
They OVERBOUGHT; and I don't believe for one minute she didn't understand the contract.
Their "income" was cobbled together and should have been DISAPPROVED.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
Thank you. Saw it all the time in TX. We got to where we would "bet" on how long people could keep up the appearances before they packed up and left in the middle of the night.
You are right. They overbought.
A lot of people overbought. If enough do, it impacts more than just them. Heck, when I was their age, it was impossible to overbuy to that extent. There is simply no way you would get the loan in the first place.
Now they give you more than enough rope to hang yourself real good.
Today, you really need a lawyer just to understand the forms being completed.
Go to a PPO doctor, be prepared to recieve a litany of forms releasing him of all accountability, meanwhile surrendering all financial interpretations to an independnet adjudicator of his choosing. Several steps later, the doctor's hired subprofessional staff have learned the ropes of the health insurance company by double and triple charging all possible claim procedures regardless of required procedures in the visit.
Then the insurance company only pays what was reasonable, but the doctor's office/healthcare professional billing service proceeds to charge the double and triple bill to the individual patient in an attempt to milk as much cash out of the fraud as possible.
Edit the form and watch the faces of the girls handling the forms who get beligerant that you dare to challenge their phrasing of a unilateral contract into a bilateral signed document.
At the other end of the spectrum, we have those who simply enter into agreements by culture, earn less than $30k/annum but live in new houses with new cars and no shortage of expendable income say to about %5k per person.
I fear our society is far less secure than most trust.
I hope she's not looking for work as an accountant.
Human beings simply cannot cope with this complexity indefinitely. Our culture will begin fraying at the edges.
Or is it already.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
Yes, I'm well aware of that. We're talking about NO down payment, here, and getting an interest only loan on top of that. It's nuts. It's a formula for being in debt for the rest of your life, the financial gain is only in the income tax deduction, and IMHO it's evidence that one shouldn't be buying that much house.
Come on...they both lost their jobs, she has cancer, he just started a new career...and the wrong mortgage is the problem?
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
Well, I was going to buy a big screen HD TV for the family (me) this Christmas. The Dentist informed me Thing One needed corrective braces for her teeth.
So the money goes to the teeth and I start squirreling away money in the cookie jar for next year.
I see people like her family every month.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
"Divorces left them both with blotchy credit"
No - not paying your bills leaves you with blotchy credit. I have been divorced. It didn't do anything to my credit because I pay my bills.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
No need to blame mortgage companies, blame those who purchase beyond their means, and who do not plan for emergencies.
"Most people don't take the time to read complex legal documents."
Buyers need to hire - themselves, not through the realtor or the seller - a good dirt lawyer who is well versed in real estate law, to review any and all contracts, to protect the buyer's interest. It's a couple hundred dollars well spent. It would also be wise to insist that this same lawyer handle the closing.
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