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Even the smartest ones lose their homes

By Curbed.com, Tuesday, May 19, 2009.

First, Edmund Andrews, an economics reporter for the New York Times (who makes $120,000 a year), falls in love, and then he buys a $460,000 house in Silver Springs, Md., by taking out two mortgages (a primary mortgage of $333,700 and a "piggyback" loan for $80,300).

Here's how his broker convinces him not to worry about the loans: "'Don't worry,' " Bob reassured me, saying what almost everybody else in real estate was saying at that moment. "'The value of your house will be higher in five years. You'll be able to refinance.' "

And then the credit-card debt starts piling up; and then his wife gets laid off; and then they default on their mortgage, but JPMorgan Chase is so busy dealing with the mess of the housing market that the bank is too busy to foreclose on his home.

Wondering how he, an economics writer, failed to understand what he was doing (well, he knew he was gambling), Andrews ends his essay this way: "Eight months after my last payment to the bank, I am still waiting for the ax to fall."

Reposted with permission from Curbed.com. Click here to view original post.

Copyright (c) 2009 Curbed.com LLC

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Submitted by Williams Smith on May 19, 2009 - 3:46am.

It is very true that we have to be careful in bank loan matters. My friend was cheated by a broker and suffered a lot.Be aware in such kind of loans.

 
Submitted by Williams Smith on May 19, 2009 - 3:50am.

It is very true that we have to be careful in bank loan matters. My friend was cheated by a broker and suffered a lot.Be aware in such kind of loans.

 
Submitted by on May 19, 2009 - 7:48am.

Ki, in the story Andrews says he had a 5.625 percent rate on his first mortgage and 8.5 percent on a piggyback second, with total payments of around $2,500 a month.

But that was still a stretch for him, because after making $4,000 a month in alimony and child-support payments to his ex-wife, his take-home pay was only $2,777 a month.

He and his (second) wife were counting on her income, and when she lost her job the debt started piling up.

The real takeaway from the story that's not really captured by the summary above was that his mortgage broker helped him get a much bigger loan than he would have qualified for if he'd disclosed his income -- a "no ratio" stated asset loan you could never get today.

Note that Andrews does not blame his mortgage broker. He knew what he was doing.

 
Submitted by Sal Antsipenka on May 19, 2009 - 8:39pm.

So here goes the dream of owning a home. What I really think though the value of homes in US even now is still too high compared to average salaries. It doesn't mean that home values have to drop more. It means whole lot more people have to rent and actually be happy with it.There is nothing wrong with renting and having a piece of mind instead of listening to upbeat mortgage people how you can afford something. By the way most people forget simple math: you did not buy this home for $300,000 - after 30 years of interest payments it will cost twice that price. The same with cars and especially consumer goods if you pay minimum paymements on your credit cards. A Plasma TV on your minimum payment credit card will have cost you double in just 5 years. So the bottom line - credit is good when you grow money, not spend it.

Sal Antsipenka
Century 21 Mike Miller Realty
Naples, Florida
http://www.naplesrealestateseller.com
International RealEstate Buyer Leads
http://www.realestatefair.net

 
Submitted by The webmaster Sara on May 20, 2009 - 6:43am.

Yes, we should be aware at the time of purchasing the property because brokers always convince the new investors to purchase new property. Brokers always said that they will provide you the loan by the banks. But we should see all aspects like property prices, loan interest etc…at the time of purchase and sell of property. Smokinhotpropertyleads.com deals with the real estate matters. You can get the any type of help regarding property purchase and sell from here: http://www.smokinhotpropertyleads.com

 
Submitted by shubhranshu agarwal on May 20, 2009 - 11:43pm.

Some real estate agents misguide the customer just for their profit. The best way is to feel real need and never to cross paying limits assuming worst case like job loss, accident etc. http://foreclosureworkouts.info/ is also a good source to know some practical tips to avoid foreclosure.

 
Submitted by aaron williams on May 21, 2009 - 6:27pm.

I think the goverment should regulate the banking industry to where the customer has to put down 10 to 20 percent to buy a house. This guy had no risk and nothing to lose if he defaulted on his payments. Plus the buyer should of had 6 to 12 months of living expenses in his bank account before he bought the house.

If the banks had these requirements the banks would have less risks, the buyers would take the loans more serious and be setup to take little financial blows.

I think less houses would be bought and the house prices would come down to where everyone could afford these houses in the first place.

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Submitted by Joe Loomer on May 22, 2009 - 2:54am.

The bottom feeders put us in this hole, and the crunch will hopefully get rid of most of them. There will always be those that seek poisoned benefit from the suffering of others.

My conversations with Buyers are always about what they can afford, not what they qualify for. I pay particular attention to payment shock if their house payment is going to be anything more than 1/4 of what they've been paying for rent. I also caution them about the dangers of qualifying jointly in an unstable job market.

 
Submitted by Medo Eldin on May 22, 2009 - 8:53am.

I just wanted to point out that losing a home is simply the physical representation of a loss of financial value. By that measure, really, everyone is in the same boat. Whether it's your house, your 401k, or salary, most people have lost and lost *a lot*.

What makes the US different than any other country in the world is that we embrace our failures if we grow from them.

No get back out there and fight!

Site: San Diego Property Management

 
Submitted by Julie Yates on May 22, 2009 - 9:10am.

Hopefully, if and when the "axe falls" Andrews will be able to deal with the fallout.

Julie Yates
Dallas Highrises
Dallas Condos

 
Submitted by Mike Ciucci on May 22, 2009 - 9:23am.

Unfortunately, this just goes to show you that no one is invincible in this market. A lot of intelligent people have taken quite a hit, but the strong ones will again take a strong foothold, and build wealth once again.
Charleston SC Real Estate

 
Submitted by Hubert Miles on May 22, 2009 - 5:11pm.

It's easy to think the those that appear to be well off have no worries. When in reality their worries just have more 0's behind them.

 
Submitted by on May 23, 2009 - 2:19am.

HI from Athens,
this is a very interesting story and here is what advices i give to my clients:
a)your loan should be the most 80% of the real value of the property.
b)the time you have decided to purchase a property, you have the money (cash or loan), you feel that you have power and your are very excited. Step back and think your options in a bad scenario.
c) make an insurance for your life, for your house and for loosing your job.

I believe this the best services i have to give. sometimes my clients thanking me for just remind them and they proceed as they want and sometimes they thanking me and thinking about it a second time. in the second scenario, it is possible for me to loose some euros of my commision, but i have three or four times more commisions of refferalls.

It is my duty to protect my clients interests.

*sorry for any mistakes in my English.

 
Submitted by on May 24, 2009 - 1:37pm.

"'Don't worry,' " Bob reassured me, saying what almost everybody else in real estate was saying at that moment. "'The value of your house will be higher in five years. You'll be able to refinance.' "

Years ago (the 1970's) when Lylene & I were first married, we had a sizeable amount of capital that was managed by a Seattle Investment Company. I'll never forget when we first met our Broker. He looked into the eyes of a couple of 20 year olds & said "you are going to be rich". That should have been my first clue but at the time, we were young & naive. The Broker advised a variety of diversified stocks one of which was American Nuclear. Our portfolio did well but American Nuclear particularly so. In fact it did so well that we diverted more & more funds into it. The stock then started down - to the point that I called the Broker & suggested later insisted that we trade out of it. He advised against the trade / trades in fact his advise will always stick in my mind & it's the point of this whole post - He said "the intrinsic value of the natural resource is greater than the value of the stock. Two weeks later 3 Mile Island blew up. American Nuclear stock, well you couldn't give it away.

My feeling from then on has been if someone is such an authority on something that they are advising you that "everyone else is", "don't get left behind" or some other from of sales pitch then you'd better fold your tent & let somebody buy into it because whoever it is that selling you has somebody else's best interest in mind.

Just my thoughts................

Rich Johnson
360-319-3267
http://www.johnsonteamrealestate.com
http://www.johnsonteamrealestate.com/blog/

 
Submitted by Brewer Caldwell on June 12, 2009 - 3:47pm.

Brewer Caldwell is dealing with these issues every day. We have owners who lost their homes that are now looking to rent and we also have investors that are looking to profit off this horrible situation.

 
Submitted by Eric Bouler on June 14, 2009 - 5:07pm.

Eric Bouler
Prudential Gardner
New Orleans,La.
www.neworleanscondotrends.com
www.ericbouler.com

Just because someone knows it may not be the best thing, it does not mean they they will not do it. You always have to trust your own beliefs when others are jumping on the bandwagon.

If you fool with the stockmarket you also know the risks. Many a smart person lost a ton of money in 2008.

The US cannot run up massive debts without bad things happening. We do it anyway for a variety of reasons. Always easy to spend money you have not worked for. Common Sense! But?

 
Submitted by Ron Redlich on June 16, 2009 - 1:39am.

With so much deficit spending we may soon have hyper inflation. Home prices may climb but so will all prices.

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Submitted by Scott Allan on June 21, 2009 - 8:07am.

I wrote a similar article in http://www.newjerseyrealestateguys.com basically saying nobody is immune. I am friends with executives in New York City, some of which blog on the internet about wealth, and THEY are even losing their home. In many cases, this is something people cannot be ashamed of. Speculative investors, that is another story, but for homeowners, this is a blanket problem that affects even the "smartest" people.

 
Submitted by Esko Kiuru on June 21, 2009 - 1:59pm.

He wasn't the only one who was supposed to know what would happen down the road to the mortgage and real estate markets and the entire economy. Just about all of the Wall Street can be lumped into this category. At least he has the guts to admit his mistake, unlike so many of the so-called financial gurus who drove the economy over the cliff.

 
Submitted by Jon Edward on June 24, 2009 - 12:50pm.

The article said he was a economics reporter yet he still overspent his monthly budget (credit cards) so the house and broker are really not the only thing in the picture.

But if you get in trouble, dump the house or short sale it, it's better than foreclosure.

real estate seo

 
Submitted by Patty Redlich on June 28, 2009 - 2:56pm.

We just lost a family of four in our area to a murder/suicide. They lived in an upscale neighborhood and he lost his job.

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Submitted by Nick McCully on July 2, 2009 - 3:18pm.

We can help with your short sale or foreclosure. Our services are free to agents and homeowners. We professionally negotiate with our contacts at the banks, and then we close the transaction because we are the cash buyer. Don’t wait for the market to bring you a buyer call us. We are ready to buy now.

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Submitted by Mark Jacobs on July 16, 2009 - 3:35pm.

Bad things can happen to good people... We cannot run up massive debts without bad things happening. We just need to stop spending moore than we make!

www.markjacobsrealtor.com

 
Submitted by Brian Keenan on October 12, 2009 - 10:50am.

Hopefully, this crisis will instill conservative values for our future generations.

Brian Keenan
Premier properties
Naples, Florida
http://www.premier-properties.com