Mortgage Mess "Hitting Home Early"

With hard times getting harder and more and more people facing the prospect of losing their homes, The Early Show is taking action.

In a special series, "Hitting Home Early," our resident financial expert, Ray Martin, and other expert, try to help people facing foreclosure.

Martin profiles and advises homeowners across the country.

He and the others also look at different aspects of the every-changing real estate market.

To see videos of all parts of the series, click here.

April 26, 2008

WITH TIMES TOUGH, PEOPLE PILING ON DEBT

They're turning more and more to credit cards and home equity loans to get by, but Ray Martin pointed to the pitfalls of such strategies. To read the full story, click here.

April 7, 2008

EXPLODING MORTGAGES

In California, when home prices soared, many homeowners had been able to live very nicely on their equity.

But falling prices have caused an epidemic of foreclosures and threatened foreclosures, leaving over-extended homeowners in dire straits.

CBS News correspondent John Blackstone reported about one such couple in one of the hardest-hit areas, Livermore, Calif. The payment on their home was about to go through the roof, from $2,800 a month to $8,000. Even though their lender was willing to work with them, and reduce their increased payment to $6,000 -- but that's apparently still not low enough.

After Blackstone's report, Martin offered his take on their predicament, and that of others in their shoes. It wasn't pretty.

To see the segment,

April 5, 2007

Q-AND-A WITH RAY

"Hitting Home Early" is drawing a huge response from viewers. They're flooding The Early Show's in-box with questions for Ray Martin.

He answered some Saturday -- on foreclosure procedures, where to turn for help if you're in over your head, and whether this is a good time to buy.

To see the questions and Martin's detailed responses, click here.

March 29, 2007

THE FORECLOSURE HOME TOUR

Real estate agents usually avoid foreclosed homes like the plague, but not Tess Langevin of Dallas, Texas. Instead of running away, she drives directly to them, taking potential househunters on a foreclosure home tour.

At her office, Langevin and her colleagues comb through the lists of Dallas' growing inventory of foreclosed homes, selecting the best of the bunch.

Then potential homeowners board Langevin's office on wheels - a converted church bus decked out with her picture.

In three hours, they cover 8 to 10 homes in different price ranges. Interior tours are quick, but enough to size up the property.

At one stop, a home where someone's dream went bust. "It's really tragic," said David Jones, "but life goes on."

You don't have to look far to find a foreclosed home in Texas. In January, more than 14,600 went on the foreclosure list, giving the Lone Star State the dubious distinction of being number three in the nation in foreclosures, right behind California and Florida.

After six months of declining sales, there's been a slight turnaround: sales of existing homes, including foreclosures, averaged a 3 percent increase nationally last month. The main lure? Falling prices. Last month, median home prices dropped 8.2 percent, motivating buyers like Marty Ballard and Becky Woodland to dive in. "It's like the homes are all on sale," Ballard told CBS News correspondent Randall Pinkston.

Still, experts say there are many reasons buyers should exercise caution with foreclosed properties:

"There's additional paperwork involved, there's also a longer time period and the purchaser needs to be a little more flexible," said Brian Block.

And realtors have to be flexible, too - they make a lower commission. "I don't like it but I do have to make a living," Langevin said, "and that's what people are looking for."

For now, Langevin has found a way to be in the driver's seat - in one month, four people have snapped up foreclosed homes.

To watch this segment,

March 25, 2008

BEGINNING OF BEGINNING OF MARKET BOTTOM?

Three real estate brokers in different parts of the country interviewed by Harry Smith indicated things may finally, finally be starting to stabilize. One said, "Buyers are waking up and saying, 'Hey, there are bargains out there!'" But the real estate editor of the Associated Press cautioned that experts point to the second half of the year for the potential beginning of a turnaround, or at least, an end to the market's freefall. To see that segment,

Child psychologist Lisa Boesky discussed it with Maggie Rodriguez. To watch the discussion,

March 22, 2008

Ever since we started our Hitting Home Early series, Ray has received a flood of e-mails from viewers, including comments, pleas for help, and a whole lot of questions. Ray will answer three of these. To watch the segment,

March 21, 2008

WHEN YOUR COMPANY GOES BELLY-UP, OR CLOSE TO IT

Many workers have to face the sudden, harsh reality of their company going out of business or suffering another hard fate. And those companies can include big names -- such as Bear Stearns and Enron. CBS News correspondent Randall Pinkston looked at what happens to the employees -- the bitterness and anger they tend to feel as they face their uncertain future. And Early Show co-anchor Maggie Rodriguez spoke with someone who lived through a corporate collapse -- Sherron Watkins, an Enron whistleblower. She worked at troubled Arthur Andersen from 1981-1990, and at Enron from 1993-2002. To watch the segment,

March 20, 2008

WILL FED MOVES HELP? WHAT CAN HOMEOWNERS DO?

The Federal Reserve Board has taken drastic steps lately to try to shore up the economy, but Martin doesn't think they'll work. He points to Lori Nicholson's situation (see stories below from March 17 and before) as a prime example of why. And he offers advice to homeowners in similar shape. The key, he says, is to ACT NOW, contact your bank, and let it know about the dire straits you're in. To see the segment,

March 18, 2008

SURVIVING ROUGH ECONOMIC RIDE

The continuing turmoil on Wall Street has given Joe Main Street the jitters. Martin put it all in perspective, explained how it's affecting our wallets, and offered advice on steering through these uncertain financial times, on The Early Show. To see the segment,

March 17, 2008

LORI NICHOLSON (Part Three)

Nicholson has asked her bank to restructure her loan, and is awaiting a response in the mail.

Nicholson points out that she's not the only homeowner in trouble in her neighborhood. Several others are, and a house similar to hers is on the market for $215,000. Nicolson's home was appraised at more than $400,000 when she took out her loan.

The $215,000 price tag "tells me we've got a problem," Nicholson says. "It tells me this government has a problem, because this isn't the only town that's suffering, and this is a pretty small town."

On Friday, Martin suggested Nicholson seek a "short sale" of her home, saying, "If Lori could hang in there and pay something on the mortgage while they try to sell the property ... she could negotiate with them not to put a derogatory on her credit report."

On Monday, Martin didn't beat around the bush, saying Nicolson's situation "is going to end badly. She will lose this home." The idea now, he explains, is to have it happen in as painless a way for her and to her credit score as possible.

Foreclosure, he says, it "the ultimate negative" on a credit report. There are alternatives, he stresses, including the "short sale" possibility. It results in "your turning over your home instead of going to foreclosure with the lender."

You must alert your bank that you're having financial difficulties, Martin says, and work with it for an orderly transition of your home to the lender.

As Nicholson awaits the home's fate, she should put it up for sale, Martin says, because a homeowner has to formally, legally prove to a bank that the house it worth less than you owe. A home has to be listed for 90 days before the deed can be transferred to a bank in lieu of foreclosure.

Nicholson recently bought a car, because she drives to and from work and her old one is in disrepair. Her thinking was to get one while her credit would still enable her to, a strategy Martin says he understands. Still, he stresses, such a route isn't for everyone, because it entails adding yet more debt to an already-jeopardized personal balance sheet.

March 15, 2008

LORI NICHOLSON (Part Two)

Some American now own homes worth less than their mortgages. Sometimes, there's nothing to do but walk away, and that's what Lori Nicholson thinks she has to consider.

The foreclosure crisis is hitting her hard. She told Early Show correspondent Hattie Kaufmann the bank is closing in: "Today's mail, I got the first notice, the collection notice for the month-and-a-half I have been behind on the payment," she said.

She owes $2,841.

"I do not have that money," she said. And what is she going to do? "I don't know. I am just going to wait for the bank to send me another letter."

Lori is on the road to eviction, after missing two mortgage payments. She has lived for 23 years in the Oakley, Calif. home were she raised her children.

After her divorce six years ago, she qualified for a loan that made it possible for her to hold onto the home, even remodel it. But the loan for $339,000 had hidden pitfalls. It was an interest-only mortgage and, instead of going down with each payment, the balance went up, and up, and up.

Today, that loan has made it impossible to stay, Nicholson says. So, she's packing up and looking for a room somewhere:

"That's my goal, to rent a room. I don't know what to do. I feel like I am treading backwards. My hands are tied. The bank won, I guess."

Friday, March 14, 2008

LORI NICHOLSON (Part One)

Nicholson has owned her Oakley, Calif. home for 23 years, but can't afford the mortgage payments anymore. To make matters worse, the value of her home has fallen dramatically, and she now owes the bank more than the home is worth.

So, selling the home wouldn't help her situation -- she would still owe the bank money, even after the sale.

Yet, she can't just ride out the downturn and wait for the home value to spike, because she can't make the monthly payments. In short, she's stuck between a rock and a hard place.

She used her savings to continue paying the bank regularly, but those funds are exhausted. She didn't make a payment in February, and is about to miss her March payment, too. If she goes on to miss her April payment as well, the bank would be able to foreclose on the home.

"When I refinanced the house about six years ago, when I got divorced, it started then," Nicholson told CBS News, "I could only qualify for a certain loan. ... I didn't realize the balance kept going up and up and up and up. Every time I'd make a payment, it's interest-only, so the balance goes up.

" ... I don't want to leave this house. I told the guy at the bank I'm not willing to walk away from a house I've been in so long. I see my neighbors leaving in the middle of the night. ... I told the banker that I'm not willing to do that. I'm willing to stay here and be worked with and (have) somebody help me, but they basically wouldn't talk to me.

" ... If they would work with me and I could accomplish the payment, I would do it. I would do it in a heartbeat.

" ...Twenty-three years this year, my son -- I actually brought him home from the hospital in this house. My daughter is just a year older, she's 24. It's tough, it's very tough to move, it's very tough to leave."

Nicholson spoke to The Early Show Friday from her home, and Martin was on from West Newton, Mass.

To see her making additional comments, and get Martin's take on her situation,

Martin says a mortgage adviser pointed Nicholson toward an "unsuitable" loan, an interest-only option adjustable rate mortgage, "the most toxic of all sub-prime mortgage products." The minimum payment was $1,000, but the monthly interest charges, not even including any principal paydown, are $2,400 a month. The $1,400 in interest she wasn't paying were added back onto the principal and, as a result, the principal has RISEN from $334,000 to $355,421, some $100,000 more than the house is probably worth.

Nicholson told co-anchor Maggie Rodriguez she cried when she realized what she'd gotten herself into.

Nicholson says she and Martin called her bank together Thursday, and she was offered a loan that was called the best the bank could do, with a monthly payment of $2,800. "That's just not an option for me," she says. "I can't afford that."

Now, she says, she's "pretty sad, again." She was on the verge of crying on the air, but was trying to be strong, because she knows many others are going through what she is.

Martin said he'd call the bank with Nicholson again, but doesn't expect to get very far. He expects to be told the only options are foreclosure or a "short sale," which might not harm Nicholson's credit rating as much as a foreclosure.

Both said they'd report back to The Early Show.