Losing the keys to the dream

When she walked away from it, all that was left on the kitchen wall of Jean Smith’s dream home were crayon marks that measured a baby’s height. The pool in her yard is still filled with toys that were frozen in the ice from winter. Come summer time, a new family expects to have a barbecue by that very same pool, a new family who purchased the foreclosed house at less than half the price Jean Smith and her family paid for it three years ago. Such are some of the stories of American families; real people behind the numbers reported every day: Billions of dollars to keep a bank afloat, billions more of private investment lost, tens of thousands of homes lost to foreclosure. Given the current rate, foreclosure statistics in the State of New York alone show that one in 545 families will lose their home. After the initial shock, the impact of numbers starts to fade. The real story is that of a local woman closing the door and walking away from a dream home she could not keep. To protect the privacy of those involved, the names have been changed. Here is the story of the Smith family. Jean and Fred Smith, parents of five, were renting a sub-standard home. They were able to save up a few thousand dollars toward a home, but not enough and their mortgage application was turned down by their local community bank. Their rental house had broken and leaking windows, inadequate heat, and it made Jean sad every time her baby picked up splinters from the worn out floors. Jean went shopping online in 2007 for a better home and found a lender. Based on her income as a nurse, they promised her a $244,000 loan on a low adjustable rate mortgage. She would make a $3,000 downpayment. Although a simple comparison of family income to the debt showed the purchase was unsound, she was sold on the idea that her income would grow as her loan matured and they could handle the $2,209 starting monthly payments. She knew her husband’s income wouldn’t change much but she would earn more in her job. She was desperate for a better life The new loan format that she “qualified for” was structured so her family didn’t need any money down and the entire amount of the $230,000 sale price could be financed. Her predatory lenders even added money to pay the closing costs. Loans like these went to people who were often already stretched to the debt limit; people who, if they had a life problem or lost a job, could no longer afford to make those minimum monthly payments. Soon after the purchase closed, Fred left Jean taking his second income with him. She still had her job as a nurse, but couldn’t handle the debt alone. If she could sell the house it would be sold for much less than what she paid for it. She had no equity, especially since she was in over the sales price when she started. The sad story of Jean and Fred is only one story of one family. As for Jean, the sadness was too much for her to handle. She tried to work out a plan with her lender that consisted of huge monthly payments. It was too much for this now single mother of five to handle. The house that Jean loved is now empty. Jean and her kids have left the area and are living with her family. Homes like Jean’s are often left with children’s toys still in the bedrooms and pots and pans in the cupboards. Sometimes there are family pets left behind. Those that don’t make it to the shelter are often found roaming around an empty house or turned loose to fend for themselves. At the other end of the tunnel There is no bright side to all of this sadness for Jean, but for the new buyer, Jessica Fields and her family, there is. Jessica Fields has been living with her husband and two children at her parents’ home, saving their money. They have been trying to buy a house for the past few years. They were able to see Jean’s house once the foreclosure was finished. The $244,000 investment of the Smiths was now available for $60,000. Her fixed rate, 5.8 percent, 40-year, $45,000 mortgage will cost Jessica $210 each month. For Jessica this is a new opportunity. She had been priced out of the market for the past few years. She could only hope for the American Dream of owning a home. “The first time that I saw this house I fell in love with it,” she wrote to her Realtor. “We could picture ourselves happily for many years. My daughter Abby ran into the pink bedroom and… the smile on her face made me want to cry... In the summer we plan to have barbecues by the pool and I will be at peace because my children will be safe.” When Jessica buys the house she will be putting down 20 percent and using a local bank that qualified her in advance. The devastation left by improper lending practice will become the dream of home ownership to a new young family. Diane Butler is a 20-year Realtor-associate broker, licensed in New York and Pennsylvania. Next week: My house is paid for. Why is it my problem? Where help may be found What happened to Jean Smith has happened to countless displaced families. When a middle-class family loses that dream the results are both financial and emotional. These people often don’t know what to do. They are often too proud to ask for help. Some alternatives are available on these public and private Web sites. www.hud.gov/offices/hsg/sfh/econ/econ.cfm www.hud.gov/local/index.cfm www.hud.gov/foreclosure/index.cfm www.phfa.org/ www.dhcr.state.ny.us/programs/ForeclosurePrevention/ www.nyhomes.org/index.aspx?page=755 www.realestateproarticles.com/Art/4311/265/Foreclosure-Prevention-Programs-Offered-in-New-Jersey.html homebuying.about.com/od/4closureshortsales/qt/011708_stopfore.htm www.foreclosure.xynfo.com/prevention/?subid=co-fpn2