Ever read or see "The Big Short"? Answers lots of questions and confirmed what I predicted. Many of those default borrowers are not minority, but instead are up to their eyeballs in mortgage debt. I know of an acquaintance of ours has a very similar house that we have once had in MO (3200 SF with a FMV of 365,000) who lives in CA and that same house is over 1 million. They have 3 loans on that house - 1 is an interest only on 500k, 250k is on an ARM and the other 250k in a conventional mortgage. We made the same amount of money as a family! They couldn't afford the mortgage and are living in his parents basement making the payments on the interest only and the conventional. Defaulting on the ARM. I won't go to what kind of cars they drive - but that was also part of the problem, purchased on HELoC funds. Mortgage lenders running commercials touting that they can get you a 125% LTV loan was just plain stupid.
I have a friend who lives down the street from me who is financially stupid. Her house has been so close to foreclosure twice.....they were ready to come out and put the notice on the door.
She took Heloc after heloc out. Any time she needed money....heloc. She redid her kitchen with a heloc. She bought 2 different cars with refinances.
The first time it was almost in foreclosure the bank voluntarily made a deal with her to keep her in it because she had worked there for over 20 years. The second time she used Keep Your Home California and they paid $80 something thousand on her mortgage.
We stayed in the same type of house, made our payments, and paid cash for any repairs, upgrades, etc. paid our house off. Now she says we were lucky. I told her we didn’t get almost $90k from the government to help pay for our house. She’s the lucky one. She didn’t like that much.
So our house is paid for and her house is not worth what is owed on it. Because if she sells it within 5 years of getting the government money she has to pay them back. And.......she’s having trouble making the smaller payments now.
You just can’t help some people.