Inside Foreclosure No. A200642668

Amid The Subprime Bust, A Family Finds A House Of Cards

(AP)  Today, many buyers find loans through a mortgage broker. Many of those loans — certainly subprime loans — come not from local banks but from loan originators. These companies hold the loans briefly before reselling them, usually to an investment bank, earning a profit and passing along the risk. Then the loans are bundled and resold as securities to investors.

The new system works well in many ways, but the incentives driving the players are very different. The mortgage broker and loan originator, rather than being restrained by risk, pursue the profit that is the reward for generating new business. An enthusiastic Wall Street provides cash for yet more loans.

But the willingness to downplay risk turns a business of caution into a hedged bet. Often, buyers qualify for these loans only because they can afford payments at the introductory rate, without considering how they'll make good once the rate goes up.

While home prices kept rising, it hardly seemed a gamble. Lenders and investors embraced subprime loans' high returns. For consumers with shaky credit, it was easier to buy a home, easy to refinance and easy to sell for a gain.

Then the market turned — and for many homeowners, the escape hatch slammed shut.

There will always be people who fall behind on loans.

But "house prices are no longer the lifesaver they were for people in good times," says Ellen Schloemer of the Center for Responsible Lending, which recently projected a sharp rise in subprime foreclosures in the next few years.

Now, owners in trouble are living in homes that may be worth substantially less than they owe. They can't sell or refinance. They are ensnared in loans whose costs keep rising.

It is a vortex that's difficult to escape.

"You Can't Squeeze Blood From A Turnip"

For a few months, anyway, the Snearys kept pace with the costs. But as 2004 ended, Tim's employer — who had already laid him off and called him back — sent him home for good.

With little saved, the family immediately fell behind.

By now, their loan had been sold. The new loan servicer, Homecomings Financial, told them they'd need to catch up and set up a payment plan. The Snearys' monthly bill jumped to $1,920.

After three months, Tim found a new job for two-thirds of his previous pay. A tax refund helped. But the larger payments "had us strapped so tight it wasn't even funny," he says.

So Angela took on more hours.

In July 2005, she pointed her Saturn into Denver's morning rush. Trying to merge into traffic on I-25, the car was slammed from behind and spun into the concrete divider.

Doctors said Angela would be OK. But disabling headaches kept her from working for weeks. The couple fell further behind.

The lender set up a new payment plan. Monthly costs jumped to $2,100.

If the Snearys could make it through 2006, maybe they could refinance and dig out.

Now, though, there was another problem.

[ralan40]

Ignorance of the Law is no excuse and neither is ignorance of a bad loan. I'm a President of a Condo association dealing with huge losses because of foreclosures...The problem and fault rests with the Homeowners. The News Media trys to elicit the sympathy of the everyday person but how can anyone feel sorry for these people? Why do people try to shift the blame elsewhere? This couple signed the paperwork, were they forced at gunpoint to sign? The fact is that they didn't have the money and practically birthed a litter of kids on top of that. Here's a helpful "hint from Hell-o-wheez"...DON'T BUY SOMETHING IF YOU CAN'T AFFORD IT! I'm not denying the fact that the loans are bad and the sales people are pushy. But these people featured here seem to have a problem of limiting themselves, (she obvously doesn't understand the concept of 'NO'). All you Bush bashers and people who think goverment can solve our problems can just go on and on about how the world is such a wonderful utopia now since the Democrats won the last election AND SO MUCH HAS CHANGED in a political News item. The problem here is everyone expects others to take the blame and fix the problem. Here's a concept...hold people personally responsible for their actions

[sclaires]

I have to rent since I cannot afford to buy a home on the disability income I get. Of course I am helping the owner pay the taxes, water, upkeep, but for me it is cheaper then buying. I would love to be able to own a home, but my income during my working years was too low to even consider that. Now the prices of homes have gone out of sight so that whoever buys one has to be able to have more then one job if single and more then two if married. I realized that I could not pay for a home so I did what I had to do and that was rent. Even now though, rental housing has gone through the roof. People need to look carefully at their income and outgo to make sure there is enought left after a house payment to provide for their family. Too many do not do that and then end up in foreclosure because of not thinking ahead. They all want a house to call a home but do not realize the expense involved in getting and keeping one. If someone is talented enough to keep up a house, then some of the expense is not there, but the individual has to be talented to do that.

[mbievtea]

I'm sorry for the Sneary', but let's look at the facts in this story: two people making together $55,000 buy a house at $204,000. Then they make themselves believe that they can afford a house and spend all the money necessary to upkeep and make improvements. Then they quickly have three children in the same time they are keeping their fantasy in which they believe nothing will change. I want to ask the question: how well were they living without the $204,000 house before they bought it? I can *** well bet they didn't have any money -- since they tricked themselves to think they could get a $204,000 house with "easy monthly payments". These people are naive, ignorant, and susceptible to the sales pitch "hey, you don't have to make enough money to buy an expensive house, because here's how you do it and just hold-off paying more money because you'll eventually ... " IDIOTS!!!!!!

[bildooreilly]

Fact is folks the government on every level, school districts, cities, counties, states, and feds steal and hide so much money stolen from us in taxes that if they'd redistribute those surpluses back to who they belong to we the people hardly any of us would ever need to beg for a loan again. They're stealing our money in an official double bookkeeping scam called the CAFR, Comprehensive Annual Financial Report which is the official double book where they list all of their holdings, liquid assets, and profits... The budget is just a shell game where they show us the bills. Fact is our system is so profitable we could all be living in a totally tax free society, still providing all of the same services and getting a dividend earnings check every month or year if things were ran honestly. It comes down to this folks, this is our country, not a few elitists, we're all shareholders in the greatest corporation in the world, the United States Of America.

This is not a conspiracy theory, the real numbers are right in the government(s) very own annual CAFR reports that they've kept hidden through non disclosure since 1946 when they started this scam. There are over 85,000 CAFR's filed every year in the usa by local, and state governmental bodies. Go investigate this on search engines....

[bildooreilly]

Fact is folks the government on every level, school districts, cities, counties, states, and feds steal and hide so much money stolen from us in taxes that if they'd redistribute those surpluses back to who they belong to we the people hardly any of us would ever need to beg for a loan again. They're stealing our money in an official double bookkeeping scam called the CAFR, Comprehensive Annual Financial Report which is the official double book where they list all of their holdings, liquid assets, and profits... The budget is just a shell game where they show us the bills. Fact is our system is so profitable we could all be living in a totally tax free society, still providing all of the same services and getting a dividend earnings check every month or year if things were ran honestly. It comes down to this folks, this is our country, not a few elitists, we're all shareholders in the greatest corporation in the world, the United States Of America.

This is not a conspiracy theory, the real numbers are right in the government(s) very own annual CAFR reports that they've kept hidden through non disclosure since 1946 when they started this scam. There are over 85,000 CAFR's filed every year in the usa by local, and state governmental bodies. Go investigate this on search engines....

[lestb35]

Since Congress has proven over and over again they don't give a rat's *** about people only corporations, maybe our kids and grandkids will not be able to buy property due to the tremendous tax burden and it will be completely under international corporate ownership. That will be the true death of America.

[rray52]

A hard way to learn about the cycles of the housing market, but from the last paragraph they are on the right track.

How about that real-estate agent, a real bottom feeder. After he got his commission he could care less he pushed them into more house than they could afford.

[standlee5]

NO BAILOUT. No matter how much Wall Street whines or lobbyists smooze. NO BAILOUTS. Taxpayers are sick and tired of bailing out these greedy bastirds. Fine them and regulate the h3ll out of them. No bailout.

[snowbrd7]

There's nothing wrong with renting.

[bocaoma]

i really feel sorry for anybody dealing with foreclosure. if you live in ohio, maybe you can qualify for some of the state bond money. check it out & good luck.