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.
Bunk.
You're not going to claim, are you, that $285k is the bottom of the market where they could have bought a home?
Some markets are high, others are not. There is no single real estate market.
"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
>>You're not going to claim, are you, that $285k is the bottom of the market where they could have bought a home?<<
I dunno. Where I live the bottom (in simple middle class neighborhoods) is much higher than that.
Well, that is if you want ANY of the windows in your new home intact at the time of purchase. And something other than dirt floors.
But I don't know exactly where these people lived. But the "bottom" can be a pretty dismal and scary place. It sounds like bankruptcy and moving back where they can find work might be in order.
Yes. My friend sold his shack for $305k and bought a five bedroom brick home on ten acres in Kentucky for $128k.
"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
I refuse to believe there was nothing more affordable. I do believe they were not prepared to live with less.
"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
I think there was probably something more affordable.
For example, in this ridiculous Seattle market, I pay $1,600 a month for a home appraised at just under $500k. I rent.
It is a nice place and I keep it nice. And let's be frank. Nobody owns real estate in the US. You rent it from the government.
I save LOTS of money every month and live in a nice place - all while real estate is most definitely hitting the crest of a very pointy bell curve. Maybe I'll buy something on the ride down the other side.
If you want to live in a world with no police, courts, roads or schools, I hope you look like Arnold Schwarzeneggar.
Hyperventilate much?
"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
Ah, leverage. It cuts both ways.
>>Hyperventilate much?<<
Sorry. It went over my head.
Sorry, I am against the concept of property taxes. Once they charge a dollar, the sky is the limit, as they have proven.
It is like what happened with building permits. Today it costs roughly $26,000 to get a building permit here for a typical home.
In 1969 it was $7.
There is a little more going on here than inflation.
>>Ah, leverage. It cuts both ways.<<
Yup. ;)
even in the crappiest neighborhood 95% of the people are just trying to pay their bills and make ends meet every month. I'ts not that hard to stay out of harms way. Children do change the mix and shouldn't be brought into it.
The key is to stay away from the 2-3% that are pure evil. I lived in a crack neighborhood in the late 80's. Houses sold for 40-60K. We rented when we couldn't sell in the 91 downturn and waited. 15 years later the houses are 5-650K. Risk/ reward is awesome when it goes your way. Many of my contemporaries rented for much more than our house payment for security reasons and it took them years longer to get their 1st homes. Because we were always fugal and never overextended we ended up at the high water mark with 5 houses. Risk/ reward mixed with sweat equity is awesome when it goes your way. I'd do it again in a heart beat.
I agree, though, that paying PMI is nuts.
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