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In Dispatches from the Displaced, one homeowner tells his or her experience of facing foreclosure to represent the over 10,000 people who lose their house each weekday. Last week we heard from Cheryl, a mother who was unable to make mortgage payments in the face of her family's overwhelming medical bills.
Today's story is from Richard Zombeck and Pamela Worden of Salem, MA. After two years of making timely home payments, their bank increased their interest rate, such that they are no longer able to make payments:
In September, 2006 my wife and I decided to move from Seattle where we had met and lived for several years. As luck would have it a family friend was selling his house and we could buy it directly without the realtor's fees. We also had a friend that was a mortgage broker, a couple others that worked in banks, some more in real estate, and family that had done fairly well property ownership. Our credit was good. We were 42, had been married for two years and buying a home was a first for both of us, but with these contacts we felt well armed and well advised.
We had money to put towards a loan, but at every turn we were told it wasn't necessary. "Why would you throw money at a loan when you can get 100% financing," we were told? The idea was to take the 100% loan, suck it up for a couple of years, improve our credit score, and refinance in two years. At 7% and 9% we were paying close to 40% of our income, but in two years we would be in good shape. We asked questions, did research, called friends.
"The only way this could go south," we were told, "is if the economy and housing market crashes at the same time. And that'll never happen."
Well here we are. For the past two years we've made every payment on time and in full. We've had two layoffs, open heart surgery, and the usual financial surprises (like credit cards going from 16% - 29%) without missing a payment or being late. In October of last year we were in the process of trying to refinance - with excellent credit - when the stuff hit the proverbial fan.
In December of 2008 our lenders announced that we were looking at loans with interest rates of 9.5% and 11%. We couldn't pay it and haven't. We've hired a law firm to negotiate on our behalf. As a homeowner lenders won't talk to you. They won't even put you in touch with the modification department. You're relegated to the collections department in some third world call center that give and mail advice like, cut your cable and Internet, cancel your cell phone service, turn the heat down, use less electricity, and ask your family for money. Then you can pay the mortgage that is now over 60% of your income.
Here's the problem. If we pay our mortgage we get no help because the banks assume we're okay and we're last in line. To make matters worse there's a double edged sword to not paying. If you don't pay, your credit goes down the toilet and banks won't even consider a short refinance because you've been late. On the other hand not paying gets you closer to foreclosure and more in need of help. So now what? We cannot afford the elevated rates and all we wanted was a home.
Admittedly we bought this home with the particular terms of the loans. Did we understand these terms? Yes, but we were also made to understand that we would be refinanced by now - if we played by the rules. We did and now the rules have changed. We could continue to make payments at a reasonable and affordable rate. This doesn't seem to matter. The banks would prefer 11% of nothing over 5-6% of something over the next 30 years.
This home was not out of our means. In fact we've been able to maintain payments despite hardships. The rules change on an almost daily basis and the banks interpretation of those rules changes minute to minute. It strikes me as un-American to not pay your mortgage and let a credit score suffer, but isn't what these banks did and continue to do un-American?
Richard and Pamela are presently trying to refinance with their lenders, but have been unsuccessful thus far.
Are you facing foreclosure, or have you already lost your home? Share a story of how the housing crisis has affected you by emailing submissions+foreclosure@huffingtonpost.com. And sign up here to receive updates when we publish new stories.
Find out more about Dispatches from the Displaced, HuffPost's Eyes&Ears series of reader-submitted foreclosure stories.