Wednesday, March 18, 2009

Upside down mortgages and economic crisis

I don't usually post about such private matters, but I think this issue needs addressing. I see comments all over social networking sites, comments on articles, blogs, etc talking about how stupid people are for getting in over their heads and (by doing so) contributing to the global economic crisis.

I know a lot of people think that the families that got in over their heads (the upside down mortgages) were just plain stupid and risky, but you don't understand HOW it happened. I'm one of those people, and I can tell you how it happened to me. Maybe you can better understand then.

We were looking for a house in the $80k range when we were first looking to relocate to another state in 2004. We have a small daughter, she was 5 at the time and is 10 now. We wanted a better area for her. A nicer house, better school, more opportunities. We were flying back and forth from the east to the west coast looking at houses, and finally decided it would be easier to rent in the area while we look instead of flying all the time. It cost us $10k to move, far more than we expected. But I guess everyone was taking advantage of the boom.

Once we were in the rental property (Sept 2004) the house prices started quickly climbing. In no time our realtor was telling us there weren't any houses in the $80k range anymore. We spoke with our mortgage broker and they said it would only be a few dollars more a month for a $90k house than an $80k house. Sounds reasonable, we started looking at $90k houses. Oops, no more of those either. Well, only a few dollars more for a $100k than a $90k house right? And our broker said we could afford it. Looking at $100k houses.

I know this may sound crazy if you haven't lived through it, but this pattern continued for months. Each time with "experts" assuring us it was just a little more a month and telling us we could afford it. It sounds dumb looking back, but it was persuasive at the time. Especially to 2 people starting to panic.

Before you know it, the houses were $200k. So we found one for $189k (a real deal it seemed) and bought it ASAP. It was panic. It was fear. We knew we were outside of our comfort zone, but we didn't feel we had a choice. The houses were LITERALLY going up $10k a month. In fact, the house we bought for $189 was $149 less than 3 months previously. We felt if we didn't just grab something, anything, we'd be priced out of the market permanently and we didn't know what our future options would be then.

We ultimately mortgaged $195k after rolling in closing costs. It's insane. $195k after looking at $80k houses. If you haven't been through it, it is hard to understand.

We can't afford our $195k mortgage. And our mortgage company won't try to restructure our loan unless we are current. How much sense does that make? Unless we make our payments they won't help us find a way to make our payments. I have to prove I can pay, and prove I can't at the same time? Talk about a lose - lose situation.

And to make matters worse? My floors are cracking up. They are separating, and one side is rising... or is the other side sinking? I don't get it, because the house was 7 years old when we bought it. It had been inspected, and passed. I don't know how it developed these problems AFTER we bought it when it was that old already? And (even worse still) my husband is having a lot of trouble with his back. Standing AND sitting for more than 20 mins (sometimes less) at a time hurts him. Although I don't know how much it matters that it hurts him to work, since he is in home improvements & repair and never gets calls for work anyway. Also, I have my own online business that has done fine since 2002. Now my sales are dropping drastically. Sales were never high enough that I could fully support the family, but then it became hard to even pay utilities and bills like that. This last month, for the first time since 2002, I've had trouble even paying the expenses of the business much less making a spendable profit!

Not trying to post a sob story for sympathy or attention. I don't get off on revealing my dirty laundry to the world. I just think many people out there are unaware how many of us got in this mess. Maybe this helps clarify it for you. I didn't want to put my family in this mess. I didn't want to have to think about this stuff 24 hours a day. I didn't want to have anxiety attacks nearly every day, and heart palpitations at only 32 years old. Did I make a mistake? More than 1 I am sure. I put my faith in "experts" who (I thought) were supposed to help me and guide me. I am guilty of trust, faith and ignorance. And I am paying for it every minute. And worse than that? My child is paying for it too. She knows far too much about debt and mortgages at 10 yrs old, and she worries. Children shouldn't worry. They should feel safe and secure.

So before you judge so harshly, please consider maybe those of us upside down on our mortgages aren't total idiots. Maybe we are just people who wanted a better life for our children, and became convinced by experts that what we were doing was safe, reasonable and neccessary. We have learned, but unfortunately it is too late. Now we suffer for our mistakes. Please don't make that any worse.

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