Greetings.
Welcome to my blog.
I am a realtor. As a realtor, I know a lot of stuff about real estate. It’s my job. It’s also my passion. I know a lot. I also know I have a lot to learn. I learn something new about real estate every day. I make it my business to continually seek and learn new things that let me be more effective in serving my customers.
It is also apparently my fate to learn things about real estate that I never really wanted to know – things that affect me personally, things I can’t control but must learn from nevertheless. Since I can’t control what is happening to me, I can at least share the information. Maybe learning about what I am dealing will be helpful to someone else. I certainly hope so, because NO one should have to go through what I am going through (and so far I have been a lot luckier than most).
Here’s my story (the short, concise version) – it’s the story of how I got from “there” to “here”…. and I KNOW it’s a story I share with millions of other people, many of whom are in worse situations than I am in right now. Please bear with me….the “back story” on this saga is kind of long and detailed, but the details are relevant to those who are facing the kind of crisis I’m dealing with now. If you have no patience for tales of woe, skip to the end.
Many years ago, at the beginning of this story, I married someone who was smart, good-looking, and ambitious. He also had NO money and disavowed any avaricious aims toward accumulating massive amounts of wealth. He said he just wanted to finish college, get a teaching job, and settle down to a comfy, cozy life. I married for love. So did he.
I knew I could do what I needed to do to hold up my end of the economic bargain and it appeared that he could do so as well. His mother and all of his siblings warned me privately that he could not keep two cents together in his pocket, and that if there was something to spend money on he would spend it. I wasn’t worried. I was frugal enough for both of us. We got married, and went back to school. After a semester it became very apparent that we needed more money to live on than we had originally thought. I grew up in a culture where girls were raised to be supportive spouses. Translated, that meant it was “ok” for a wife to work to support the household while her husband went to school, and then when he was graduated and employed, the wife was expected to stay home and raise babies while hubby worked at a sufficiently lucrative career to support the whole brood.
So, being dutiful and believing all I had to do was follow the prescribed “checklist,” I volunteered to go to school at night and work during the day so we could pay rent and continue to eat. To fill in the gaps because my job didn’t pay very well, we took out what we could in student loans. He finished school in three more years and got a job teaching high school. It didn’t pay very well, so I kept my day job and continued to take night classes. After teaching for four years, he went back to graduate school so he could teach at the college level.
I kept working full-time so he could get his M.A. and Ph.D. as quickly as possible. And then we had a baby. I stepped out of the work force for two years, but ultimately the economics of graduate school forced me back into another low-paying job just to get insurance benefits. Fortunately it also provided tuition benefits. Finally, after fifteen years, I was able to use this extra support and finish my bachelor’s degree. I graduated with my B.A. the same year my former spouse completed his Ph.D. coursework.
Twenty years ago, I believed it was impossible that I would ever be able to buy a home of my own. My then-spouse and I had been in college for years, and accumulated a sizable balance on our student loans – loans we thought would throw our debt-to-income ratio so far out of whack that we would not qualify for a mortgage of any amount.
Seventeen years ago, we moved to a little town so my then-spouse could begin working at his first professional job. It didn’t pay much, but the cost of living was low, so if I picked up a couple of part-time jobs we’d be ok. Unfortunately, there was almost nowhere to live. The small college town had few rentals, and they were all claimed by the time we arrived. At last – with the help of a devoted realtor – we found a place to land. It was awful.
We had rented the top floor of a house that had been divided into two apartments. The renter downstairs smoked and drank nonstop (the smoke came into our apartment through the common ventilation system, and the booze bottles accumulated all around the outside of the property when the garbage cans inevitably got overloaded). He fought with his girlfriend, and made all kinds of noise at all hours. We lived with this for months because we had nowhere else to go, even though our son had horrible asthma and allergies and even though the renter downstairs made increasingly regular forays into our half of the premises in hot pursuit of his girlfriend (who was constantly trying to get away from him). We complained to the landlord (who had promised us a peaceful and smoke-free environment), we called the police, we phoned a lawyer. Nothing changed.
Finally a friend said “why don’t you buy a house?” We said, “We can’t qualify; too much student loan debt.” The friend hooked us up with a local mortgage lender, who walked us – one step at a time – through the process of qualifying, documenting, proving, justifying, and dancing on our heads in order to secure approval for a home loan.
It took weeks, but finally – with the help and blessing of a 100% VA loan (those 12 years the ex did in the military finally paid off) – we got approval to buy a house with a purchase price not to exceed $70,000 (including closing costs and VA funding fee, which we had to roll into the loan because we had NO cash).
The same realtor who had helped us find the rent house from hell knew we were desperate to get into a place of our own. He kept his eyes open, and the minute he heard of a place that could work for us he called me and said “come look at this house NOW and be prepared to make an offer NOW if you want it; it won’t last the night.” We went, we looked, we made an offer immediately, and we won the multiple offer contest. I was pretty sure our realtor played both sides against the middle (the house was listed by one of his colleagues) but at that point I was so desperate to get to a safe haven that I didn’t care as long as he or we didn’t do anything illegal. The sellers were happy; we were happy.
We closed on our house and moved in 6 weeks later. It was old, the appliances were all creaking and ancient, and the bathroom fixtures were pink upstairs and blue downstairs. It was decorated in late 1970s heavy florals, it had a wall that peed runoff water whenever we got a hard rain, and the carpet downstairs was industrial indoor-outdoor rubber-backed stuff that had long ago lost its ability to shed dirt or any other substance. It had a back yard that sloped and the ugliest front entrance I ever saw on a house, but it was ours.
Somehow, against all odds, we had managed to buy a home. To make sure we could keep it, even though the university where my then-spouse worked kept changing his job status from full-time to part-time to now-we-want-you to now-we-don’t, I worked on my graduate program as much as I could while holding down 2, 3, and sometimes 4 part-time jobs myself. It wasn’t perfect, but we managed. We lived in that house for four years, and I would have stayed there forever except my then-spouse got offered his dream job at a university 1500 miles away.
I was sure we’d never be so lucky as to be able to buy another house again, but home is where the kid, the spouse, and the dog are, and they were all moving, so I packed up and went with them. In a prelude to my future entrepreneurialism, I decided to sell our little house myself. There was no “growing real estate market” where we were, and we had virtually no equity to use to pay our realtor friend with. I explained our situation to him and he understood. He even coached me on the basics so I wouldn’t do anything stupid while selling.
I put a sign in the yard and an ad in the paper on Friday afternoon. By Wednesday of the next week, we had a contract and four back-up offers. When we closed five weeks later, we cleared just enough to cover the cost of the moving truck and trailer, and first and last month’s rent on a sort-of-decent duplex in what we were told was the best possible rental neighborhood in our new town.
Once again, a realtor saved our skins. She went to check out the rental for us because we had no opportunity to do a preliminary trip to find a place to live. She took photos, talked to the landlord, scoped out the neighborhood, and came back with a verdict: it was good enough that she’d be ok with her own kids living there. That was better than we could have hoped for. We loaded up the dog and the kid and all our gear, waved goodbye to our little house, and headed for the great unknown.
That was thirteen years ago.
Apparently the charm hadn’t quite broken for us yet. After languishing in unemployment land for 4 months, I was offered a job that paid well enough for us to seriously consider buying another house. Houses in our new town were running two to three times higher in price than our old town, but my new job covered that gap. Once again, VA came through with an eligibility certificate for 100% financing.
We found a neighborhood we loved, and realized that we could actually build a new house cheaper than we could buy an old one. Unbelievable! So….a dozen years ago, my now-ex-spouse and I contracted to have a semi-custom home built for us and our son. A little over 11 years ago, we moved into our beautiful new home in our wonderful new neighborhood and commenced doing what proud new homeowners have been encouraged to do for at least a generation: we proceeded to rack up a pile of debt to “improve” our new home. The builder built the house, but he didn’t really “finish” it because that would have cost more than our mortgage lender was willing to finance on a first mortgage. To suit our lifestyle, we needed a privacy fence around the back yard (gotta keep the dog in, after all), full sprinkler system front and back (one-third of an acre is too big to haul a sprinkler hose around), flower beds and trees and other “scaping,” window blinds throughout the house, and decor decor decor to go with the furniture furniture furniture! These incidentals do not technically contribute to the market value of a home, so lenders outwardly encourage borrowers to use cash to cover the cost rather than wrapping the expense into the primary mortgage. This is good advice. It is also immediately negated by what happens after you close on your home purchase (at least this is what happened to us).
What happened? The lenders talked out of both sides of their mouths. They know that nobody wants to carry the decor from their drab and dreary rental duplex into their gorgeous new home, and they know that most new homeowners are tapped out because they’ve spent what available cash they had to close on their home purchase. The banks all have access to new loan information – they KNOW who just bought and sold a house. They take that info and channel it into credit card marketing.
Virtually every day we would receive another offer for interest free or low-interest credit cards with easy approval terms. We had paid off our low credit card balances in order to qualify for the home loan so we went ahead and signed up for a couple of new cards, just for emergencies. Seemed like we had an “emergency” pretty regularly after we moved in. We constantly had house guests, and needed to furnish rooms and finish projects. Those cards came in really handy. Once the card balances were too high to pay them off in full every month, we put ourselves on a credit card repayment plan…we had to pay at least half again as much as the minimum payment every month and apply it to the principal balance. Great – that was easy. We could do that even when the card was maxxed out. So we’d pay down the balance a little bit and then run it right back up again buying more new stuff.
Shopping became a hobby. Spending money became a mandate. It was ok – we had two full-time incomes and plenty of wiggle room in our budget. Our “cash only” rule evaporated along with the cash. The new house was a very hungry baby.
Never mind that the new cards were maxxed out. More credit “opportunities” arrived in the mail every week. Several new credit cards later, we were $15,000 in debt to Visa, MasterCard, Home Depot, American Express, Discover, and a couple of others, and we had been in our house less than a year! It wasn’t the total amount of debt that was the daunting problem (although that was certainly a concern), but rather the monthly payments. We were keeping up with them – barely – but because we had maxxed out the credit lines on the cards, the minimum monthly payment was very high on each account and those minimum payments were just barely paying the accrued interest; the balances on the cards were not coming down at all!
No problem-o. The banks had another plan to “help” us. The local credit union was offering an interest free (for the first year) home equity line of credit. They had even mailed us an invitation to come talk to them, telling us it was ok if we didn’t have a lot of equity in our house right now because we lived in an up-and-coming neighborhood and property values were increasing every day. They were “willing” to lend us money based on the anticipated increase in our home’s value over the life of the loan (5 years to draw funds; and then 5 more years to pay back the loan). Wow! We must have been really special for them to make an offer like that.
Quick-like, we made an appointment, went to talk with the home equity line of credit loan officer (who was much less friendly in person than on the phone), signed on the dotted line that we understood all the terms and conditions (including an adjustable interest rate that would lock at the “market rate” + x percent at whatever point the loan draw period ended and the repayment period commenced). Three business days later (after the right-of-recission period ended), we got a brand spanking new check book for our HELOC (home equity line of credit) that would let us write loans to ourselves for amounts up to our available credit limit…$25,000!!
Wheee! The first thing we did was write big fat checks to each of the credit card companies. We paid off our credit card accounts and stuck the cards in deepest darkest corners of the sock drawer, to be used only in case of dire emergency.
Then we figured out how much we had left available to work with…. slightly less than $10k. This was GREAT! We could go on that family Y2K cruise we had promised ourselves, and furnish the living room, and still have a little bit left over as cushion against emergencies. We would focus on paying down the balance after we got back from the cruise.
Y2K came and went; we went on the cruise; we needed one thing after another, and used up the available balance as quickly as we paid any of it down. In early 2001 we refinanced the HELOC with a different lender (this time with a national FDIC insured bank) and got a credit line increase up to $35,000 so we could use the extra cash to pay off our now maxxed out (once again) credit cards).
Late in 2001 my then-spouse started an affair with a co-worker. I knew about the friendship, but really thought this person was actually a friend to both of us. That would have been nice. Silly me. By Christmas-time, the then-spouse was clearly in crisis and saying things like “I’m afraid this might be the last Christmas we get to spend together” and “Do you think our son would be ok if he didn’t have a father around while he was growing up?” As trusting and naive as I was, I could only attribute these maudlin expressions to a suddenly very urgent fear of dying. As I tried to pay more attention and be more reassuring to my then-spouse, he became more distant and hostile.
On Christmas Day, after gifts were opened, he disappeared from the house for several hours. When he came back he said he had “been for a long walk” and was in a much better mood. Same routine happened on New Year’s Day, and again a couple of weeks into January … MLK day… I was beginning to see a pattern.
Then I got the post-holiday credit card bills. I expected them to be high, but not that high, and there were charges I didn’t know anything about that I couldn’t reconcile against what I knew Santa Claus had delivered from and for us. I asked my then-spouse if he knew anything about the mystery charges, thinking he might provide an explanation like “oh – that surprise I promised you for your birthday – it’s this charge here, and here, and here; you’ll just have to wait until your birthday to see what it is.” No such explanations were forthcoming. He just shrugged and said “No idea. You must have forgotten something.” No, I hadn’t.
My birthday came and went, with an ugly little $25 necklace as my “big surprise”. The credit card bills came with a bigger surprise: additional charges for hundreds of dollars more for purchases I had nothing to do with. My then-spouse was out of town on a research trip. Lucky for him. While he was gone I did some research of my own. I found enough evidence to nail him for every form of disloyalty, infidelity, conversion of assets, etc., that would be necessary if I were going after a conviction. I didn’t have time to deal with all that stuff. I had to act fast to protect myself and my kid from total disaster.
I went to another local credit union and opened my own checking account and moved as much cash as I could get my hands on (which wasn’t much). Then I changed my direct deposit paycheck to land in the new account, cancelled all auto-debits from the joint checking account I shared with my then-spouse, and started looking for a place to live. I wasn’t sure who was going to live in it, but somebody was moving out.
Ultimately he moved out (and moved back in – penitent, and moved back out again two months later, not penitent at all), and I ended up with a house I couldn’t afford – a trade-off I made in the interest of being able to stay in my graduate program instead of having to drop out to relocate, and in the interest of not having to disrupt our son’s life by making him move just as he was finally getting settled in with a good group of friends and going into high school. Note: the WORST time to get a divorce is when your son is between the ages of 12-18. I’m just saying. For the record.
Well…Mr. used-to-be-wonderful was right about one thing: That WAS the last Christmas we spent together.
He (the then-spouse) made monthly alimony-in-lieu-of-property-division payments to me until our son was 18. These payments just barely covered the cost of the monthly payments on the first mortgage. It was tight but we managed. Then after our son graduated from high school, the payments stopped.
The nightmare soap opera that followed doesn’t need to be detailed here – it gets played out every day in every town in the country by cheating spouses who think that the solution to their own unhappiness lies in finding someone new to go bed with. The fallout lands on everyone nearby and poisons all of us.
In my case, 9+ years later, the fallout includes the financial disaster that inevitably accompanies profound depression and ongoing illness triggered by emotional and marital betrayal and chronic health problems left untreated due to lack of insurance and/or money to pay for doctors and medicine, job loss resulting from the depression and high-absenteeism and failing to perform adequately at work, severe credit and financial problems resulting from extended unemployment and underemployment, personal bankruptcy (a strategic move designed to finally dump the credit card balances when no more HELOC refinances were available, the last one setting the available line of credit at $49,500 and getting maxxed out immediately to pay the cost of putting the ex into separate living quarters so I wouldn’t have to look at him), formidable medical bills resulting from extended illness, loss of medical treatment due to lack of funds and lack of insurance, and loss of insurance coverage due to job loss; and last-but-not-least, the crisis to cap all crises: threatened foreclosure on the house due to an inability to make the monthly payments because of lack of sufficient income. That was a really long sentence; sorry.
Why didn’t I sell the house right off the bat? For the same reason so many others in the past several years haven’t sold their homes even when it seemed the prudent thing to do: My house is “upside down” aka “under water” (i.e., my house is worth so much less than what I owe on it that I can’t possibly hope to sell it and pay off the notes). This was true 8 years ago, and it is much more true today. Worse still, the payments on the two mortgages have more than doubled in the 12 years since we bought the house, and – largely due to the ongoing economic “downturn” (political fluff-talk for full-blown ECONOMIC DEPRESSION) – I haven’t been able to keep up with the monthly expense.
Of course hope springs eternal. Next month always promised to be better. A new job was right around the corner. Steady and adequate income was not just a possibility, it was a reasonable expectation. There was no reason to bail just because of a couple of rocky billing cycles.
After falling behind for an extended period in 2005, I got a new job that paid well, and I was able to take the payment from a court-ordered retirement benefit split and use it as income so the lender could justify a conventional loan modification. Whew. Dodged that bullet and managed to keep up the higher payments for over a year.
Then came new disaster. The great new job contract I had landed months earlier ended with no notice. I came back to work after the New Year’s holiday weekend to a somber-faced supervisor who summoned half the crew to his office (turns out it was the half last hired, including me) to let us know our services were no longer required and we would be given a box to pack our personal things into and escorted out of the building. Do not pass GO, do not collect $200, do not let the door slap you in the butt as you go out.
I no longer wondered IF the other shoe was going to drop; I just started wondering WHEN (and started looking overhead every time I went outdoors).
Enough was enough. After checking the skies, I looked around and saw the writing on every wall I passed. I was a single mom pushing 50, my ability to complete my graduate education had gone down the toilet with the divorce, I was over-qualified for all the jobs I had done before I went to grad school (so no one would hire me back into any of my old jobs) and under-qualified for the jobs I had been going to grad school to learn how to do (so no one would hire me for a new career either). It was time to go into business for myself, although I didn’t know how. I felt like poor Frodo as he led the fellowship toward Mordor: “Gandalf, right or left?” Only I had no Gandalf either.
After taking a few weeks to do research and get my bearings, I enrolled in real estate school. The real estate market in my town was stable (not inflated, not flat) and I had a knack for dealing with people and the detailed kind of legwork and hand-holding that buying and selling houses requires. The class was easy: eight hours of lecture and a quiz per day tailored specifically to the state licensure exam. In two weeks I was done. A week later I had passed the state exam. A week after that I had found a knowledgeable and warm-hearted broker to hang my license with, explained my situation (“I’ve got nothing but ambition and an unlimited ability to learn”), and went to work. It took awhile, but I finally started generating consistent real estate income.
It was a whole new world, but my background let me pick up what I needed to know and I quickly fell into a routine that was “guaranteed” to make me successful in real estate. I bought the “how to” and “Complete Guide for Idiots” real estate sales books, read them over and over again, and followed their and my broker’s instructions. And I did fairly well, becoming a million-dollar producer and then a multi-million-dollar producer in each of my first three years in the business.
Then the other shoe dropped – again – and not just on me. The real estate market went kablooie….in California, Florida, Arizona, in state after state inflated real estate values plummeted virtually overnight. Loan defaults and foreclosures became “normal,” and banks started going belly up. Gradually the disease spread itself across the entire country. EVERYBODY is affected by this. Those of us who try to make a living in real estate are affected double or treble.
You know the rest of this story, at least to the extent it has been reported in the national and local news. What you may not know is how to get yourself out of the traps caused by this crisis. Old Shelob is out there, and she doesn’t care who she snags in her web as long as she can eat when she wants to.
After my third year in real estate I thought I was finally on the road to panic-free economics. I had quadrupled my income in the first three years and had every reason to believe that trend would continue. What a relief. When I first got my license, I had no income for several months until I was able to generate a bit of cash flow from sales commissions. I managed to make enough money to convince the bank to do another loan mod on my mortgage when I fell behind on my loan payments for a second time. They wouldn’t do a full refinance yet – they said I had to be in business for at least two years before I could qualify on my own - but they could see a pattern of established income and went ahead with another mod that wiped out my late payments and raised the monthly amount again. My mortgage payments that had started out in 1998 at $1060 per month were now up to $1670. And then the HELOC locked. Those payments went from $300 per month to $651 a month. OMG.
The second loan mod came halfway through my third year in real estate. I was making money and doing well, but even so, it turned out that the second loan modification was more like a nail in the coffin than a respite from terror. I think I managed to make 6 months worth of payments before I fell behind again. That was in November of 2008. Somewhere along in there, the recession and mortgage crisis hit my market. My income dropped to nothing for several months in a row. I couldn’t make my house payments, and it was a struggle to keep the lights on and the people fed.
There was still a glimmer of hope, though. At the end of 2008, the federal government provided a bailout package to the big lenders, including the two banks who service the notes on my house, in exchange for them offering loan modifications to borrowers who wanted to keep their homes. Hosanna! Salvation! I could apply for yet another loan modification – hopefully one that would bring the payments DOWN instead of jacking them up! Even though I didn’t want to and did everything I could think of to prevent it, ultimately I went 90 days past due (making my property foreclosure eligible) in February 2009.
Just FYI, once you fall 90 days behind on your mortgage payments, most lenders will not let you make any regular monthly payments until you catch up the entire past due balance. It doesn’t take a math genius to figure out that for most borrowers, coming up with that kind of cash (3+ months of regular mortgage payments, which generally constitutes somewhere between 25 to 50% of one’s disposable monthly income) is next to impossible. Trust me, the banks know this. There’s a reason for this policy. I’ll cover that later.
Fast forward ahead to today:
For the past 18+ months, I have been “negotiating” with my mortgage lenders to modify the loans on my personal home so I can afford them. The first lender (lienholder) holds the original mortgage note – purchased in the secondary loan market from somebody who bought it from somebody else who bought it from the original lender who made the loan so I could buy my house. The second lien holder holds a home equity line of credit promissory note on my house. Both lenders took the bailout money, and both lenders paid back their bailout funds. And both lenders have been a royal pain in the derriere when it comes to negotiating anything. Their definition of “loan modification” does not seem to line up with mine.
I have submitted at least 10 modification requests to the primary lien holder, and had all of them denied. BUT they always tell me to reapply. Why? More on that coming up.
I submitted at least 5 requests for HELOC modification to the second lien holder before getting a response from them that my request for help was virtually guaranteed to be denied. Why? More on that coming up.
Nota bene: the rules for loan modifications are constantly changing. If you don’t qualify this time, reapply. You never know what might be different now that could let you get what you need.
Up next: DON’T MOVE – NO, REALLY, I MEAN IT!
Coming up: What You Don’t Know CAN Hurt You!
Coming up: Spilling My Guts
Coming up: Make Them Prove You Owe Them
Coming up: No Honor Among … Lenders
Coming up: The Down Side of Staying Put
Coming up: The Rules, and the OTHER Rules.
Please note: this blog is intended to provide information about my personal experiences as they relate to the mortgage meltdown and its attendant consequences for me, my family, my friends, and my customers. The information provided here is not intended as legal advice and should not be construed as such. Should you find yourself in circumstances similar to mine, I URGE you to contact an attorney, a doctor, a psychologist, your mother, your best friend, and – most importantly of all – contact your realtor and then contact your mortgage lender and do everything you can to make your lender help you save your home or help you sell it. You don’t need a foreclosure, and neither does your lender! If you need help finding a knowledgeable realtor in your area, contact me (louisajeanrandall@gmail.com ) and I will be happy to help you find a responsible real estate professional who subscribes to the Realtor code of ethics and will help you assess your best options given your situation.
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