Alice Peoples called me last week. That's not her real name, but she is a nice middle aged woman with two children and a husband of ten years. She was anxious on the telephone, a step removed from frantic. Her husband was avoiding a situation ready to explode.
The couple bought their dream home in late 2003 and qualified for a $480K loan with a mere 5% down. Better yet, their payment was an easy to make, $1400 per month. The home was 4 bedrooms, 3 bath with a huge yard for their young children to play. The neighborhood was safe and close to her husband's job. Alice didn't work, but she didn't have to because the payments were so affordable.
The reason for her call was that they were nearly three months behind on these affordable mortgage payments and her husband refused to do anything. He'd recently lost his job and was dealing with depression. She was angry, but she was also scared. What if they had to move? Where would they go?Would she have to find work?
As I studied her loan, I discovered the loan was an option loan. The $1400 per month was the minimum amount the lender would accept, but it wasn't even close to fully debt servicing the loan. Each month they were losing their equity and after four years of payments, their balance was $518K.
How did this happen? By paying less than the amortization schedule the loan became a negative amortization situation with the shortgae gradually being added to the balance.
Their are thousands of these loans ready to adjust and many will simply explode. If you are in one of them, please get some help because if you are paying the minimum you are not buying your home. In fact, you are not even renting. You are sinking in quick sand each month. Consider that a home is losing value each month because of a bad economy and then add the negative amortization on top of that and an disaster is ready to happen.
We negotiated a deal with Alice's lender, but it wasn't easy for the family. In fact, I suggested they do a short sale, but she insisted the home was worth saving. Is your home worth saving? Please call us to discuss your options.
