When A Mortgage Turns Upside Down

In The Slumping Economy, Some Mortgageholders Face A New Struggle

(CBS)  This is part of a CBS Evening News series called "Hitting Home," which looks at how the slumping economy affects individual Americans and their families.

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When Karen Wimbish and her husband bought their three-bedroom home in suburban Los Angeles, the investment felt as safe as houses.

"We never intended to go anywhere else," Wimbish said.

They felt confident enough to take out a $100,000 home equity loan to add on - and make the house wheelchair-friendly for their handicapped son, CBS News correspondent Cynthia Bowers reports.

"We never had any worries - until now," Karen said.

That's because the mortgage jumped from 7 to 9 percent - and $1,000 per month.

Wimbish hoped to get out of the hole by refinancing her mortgage at today's lower rates -- only to be told she doesn't qualify.

Thanks to the slumping housing market, she now owes more on the home than it's worth.

"It's dropped about $100,000 in a year. And it's dropped enough to put us upside down in our loan," she said.

Millions of Americans are facing the same problem, In fact almost two out 10 who bought their homes in the last two years are already upside down.

Merced, Calif., is the hardest-hit. Seventy-two percent of homeowners there have negative equity; 47 percent do in Port St. Lucie, Fla., according to Zillow.com, an online real estate service.

But even though they may not qualify for refinancing, economist Diane Swonk of Mesirow Financial, urges homeowners to hang on.

"The good news is if you can't refinance, that we do have falling interest rates," she said. "And you might even see your adjustable-rate mortgage adjust down now instead of up."

And she said homeowners have leverage, which Wimbish used when she told her bank to either drop her payment - or come get the keys and try their luck selling her house.

[ajmystic]

I agree with standlee5. The county keeps jacking up the value of houses just so they can get more tax money. I bought a house one year ago. It was "assessed" by the county at $47,500. I had an appraiser come out and he went thru the house, looked at any defects and said it was only worth $32,000. I guess whoever "assessed" the house just did a drive-by assessment. Looked at the outside, saw a detached garage, decided it was worth $47,500. Thank God I had an appraiser come in. I only paid $32,000 for the house and since I am on a fixed income, I have a hard enough time paying the payments on it. No way could I have afforded anything more. I even had some mortgage companies tell me that they didn''t loan less than $60,000. What has happened to the good old days when even a young couple starting out could afford a house? Nowadays, both people have to work their butts off just to save enough to have a decent down payment and that takes several years. No wonder there is such a downturn in the housing industry. No one can afford a house built several years ago, let alone new construction!!

[hypnotoad72]

The lady''''s got guts,go girl!Now,if only the folks that feel suicidal over this would realize it''''s not their fault,and get homicidal...

Posted by lexluthor5
----------------------
Why advocate murder? Suicide isn''t pretty, but don''t people have enough problems already without the fear of one''s neighbor shooting them?!

There''s got to be a proper way of setting up a fair working class. By now it''s obvious offshoring is at least partly responsible for today''s crisis. It''s by no means the only or the most contributing factor (it contributes more fear than anything else, but I digress).

[hypnotoad72]

So what accountability do local govts have in this debacle. They''''re happy to assess at the bubble value adding to their insatiable appetite for taxes. They are just as culpable as the lenders and borrowers. They saw this happening and just continued to reassess every year.

Posted by standlee5
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Meanwhile, certain oil companies are saying they can''t do anything without hints from the government.

http://www.shell.com/home/content/aboutshell-en/our_strategy/shell_global_scenarios/two_energy_futures/two_energy_futures_25012008.html

Meanwhile, as candidates used to say and no doubt won''t anymore, "Elect me because I will run government like a business!" Which they should. Congress giving itself a pay raise; if $30k graphic design jobs (of which one needs to spend $40k to get the piece of paper claiming qualification for) are too expensive and need to be offshored, why not offshore Pelosi''s too.

[otionwaves]

'' ..

8.1 billion folk
= 90,000 ''countys'' of 90,000 folk
= 300 ''villages'' of 300 folk
= 17 or 18 folk about 17 or 18 clusters of sick beds

near 16 gathered around near 4 sick beds
= 20 folk

if $100,000 will buy 3/4 acre and $400,000 will build a 3,000 square foot home
then $12,000 will buy 3920 square feet
and $48,000 will build 360 square foot home

a county of 90,000 folk
with a poverty rate or 12%
would require homes and jobs for
90,000 x .12 = 10,800 folk

10,800 x $60,000 = $648 million

$648 million x 2 = $1.296 billion
(poor estimate for a total mortgage)

1.296 billion / 30 years = $43.2 million per year
$43.2 million / 18,000 ''tax payets''
= $2400 per tax payet per year

except:

each tenant is paid (whether laboring or lazing) so as to pay the mortgage and other expenses:

each ''village'' or ''mall'' of 300 alots space for ''vanagement'' or ''media production'',
producing news bullets of everyday needs and wants and available assets, as well as farm / medical you are here map song dance skit kit tips and tricks

''.. don''t dance get well feed world get sick tax world hike naked dance dressed porn songs rallyd around the sponge bus sick beds swimming drifting the spore bloom weed dragon trail fickle first aid lunch farm cottage studio trail crossing yseedsberry trail groups .. ''


.. ''

[finlwhiz]

There''s a reason you pay for an appraisal on a home. I was going to live in my home for 3 or 4 years, TOPS. So I took a chance on this bandwagon, even though I thought the prices were ridiculous.
Everyone said, it may not keep going up like it is - but it''ll never go down. I am still way under what my appraisal was with regards to ''imaginary equity'' when I bought. But now I''m upside down, my life savings is gone GONE! And, I can''t rent for near what the mortgage payment is - certainly can''t sell for even close to what I paid 3.5 years ago.

This is losing battle, I realize that I signed a contract - but isn''t the reason you go through a bank, order an appraisal, etc. to ensure that this is a smart move for all parties involved?

Maybe not, but I''m not throwing away any more money on this pit. If the bank wants to write down my loan to an amount that affords me the opportunity to play landlord, FINE. Otherwise, they can play realtor.

My 2 cents!

[standlee5]

So what accountablility do local govts have in this debacle. They''re happy to assess at the bubble value adding to their insatiable appetite for taxes. They are just as culpable as the lenders and borrowers. They saw this happening and just continued to reassess every year.

[random_radar]

The comment I made below is speaking from experience. We were upside down on our house after the dot com fiasco. I was going to walk away from the house with money in the bank. The mortgage company pressured us to do a work out plan, and my wife decided to put $7500 of mortgage payments on a credit card to "save" our home even though we had moved to another city for my new job.

What happened? We went bankrupt. We couldn''t pay rent and the mortgage, and we couldn''t sell, so we wound up moving back to the house we own. Except that we don''t really own it because it is in foreclosure since our bankruptcy. My wife has been paying the bank for 3 years now to keep them from repossessing the house. We can''t sell it, we can''t save enough to move, and it is bleeding us to death financially.

If you think losing your house is a nightmare, just try keeping it when you can''t afford it and can''t sell it. After a couple of years you will agree that there are worse things than CIA waterboarding.

[random_radar]

If you walk away from your home, in two years you can qualify for an FHA mortgage so long as you don''t have any other credit problems.

Suppose you have $10,000 savings. Your mortgage goes up $1,000 a month and you can''t cover it, so you use your savings. In less than a year you are broke and you can''t sell your house because you owe more than its worth. Now you lose your house, your equity, and have no money. Now what will you do?

But suppose you CAREFULLY evaluate the situation and walk away now. You have $10,000 in the bank, no mortgage payment and no house. You rent for two years while the recession comes and goes. House prices adjust downward, and maybe mortgage rates do too. You qualify for an FHA mortgage and can use that $10,000 to buy a house again.

I''m not saying everyone should walk away from their house, especially if you have equity and are not upside down. But if you are smart enough to recognize that you are going to lose, walking away as soon as you figure it out is the best way to handle it. Creditors want you to spend every last dime trying to save your home and your credit rating. But once they bleed you dry they will still take your house without even a thanks for spending your life savings.

[amazedd]

I don''t understand. If people have a mortgage on variable interest rates, when the rates go up they pay more and when the rates go down they pay less. What don''t they qualify for?

[feelfree1]

Re: "Thanks to the slumping housing market, she now owes more on the home than it''s worth."

We''re going to be seeing a lot more of this in the near future.

Walk away.

I know that it sounds painful, but you are throwing your money down a hole.

[g-gfather]

How can buying a home 100,000 over value make sense?? Refinance? Your desperation is their leverage. A drop kick right between the post should do it....LET THEM HAVE IT!!!!! Great- grandfather

[brianbwb-2009]

"The good news is if you can''t refinance, that we do have falling interest rates," she said. "And you might even see your adjustable-rate mortgage adjust down now instead of up."

Bullshirt, it will never be adjusted down, the banks would rather foreclose and dupe the next sucker than to lower the monthly payment.

[gce65]

The banks and mortgage companies should have known stuff like this would happen. They probably did but figured they could foreclose and sell it. Looks like the joke''s on them because the market is flooded with foreclosed homes. I just don''t understand where is the incentive for people to continue paying in an upside down loan. Why, so you can still make the banks money on their inflated interest rates?

[Razzl]

Today''s pool of bad-credit foreclosure and default owners becomes tomorrows next customers for credit cards, car loans, and, of course, mortgages. If so many are in the same boat, does anyone think they''ll be made to wait very long for a second chance? People who went bankrupt in the 90''s were getting credit card offers 6 months later...

[lewiston14]

Good for her. She told is just like it is. The ank would pay something like 60,000 to TRY to sell the house. Time to stop playing games with these banks. They can''t kill ya but you can kill them.