Posted at 3:26 PM on October 25, 2011
by Paul Tosto
Filed under: Housing and mortgages
'I will never pay this off."
"I no longer view my home as an investment, but a place to live."
"Our credit rating has been ruined."
You can't read through the heartfelt stories of Minnesotans and their mortgage struggles and not feel bad. These are folks, for the most part, who made what looked like a smart economic decision and were blindsided by plunging home values and a crumbling economy that put them underwater.
President Obama is expanding a federal program that help people refinance at a lower rate and, hopefully, stay solvent. It might not help.
We asked: Has your mortgage or home value caused you any problems in the past five years? What, if anything, should the government do to help people who owe more on their mortgages than their property is worth?
Stuck in a neighborhood full of foreclosures
We bought our home in the Frogtown neighborhood of Saint Paul in 2005 for $174,000. It currently has a market rate value of $122,000. Before buying our home, went through a City Living first-time homebuyers program through the City of Saint Paul and through this program were given a 30 year fixed loan with an interest rate of 5.25%.
As a part of the City Living program we are not allowed to re-sell our house until we had lived there for nine years. We recently inquired about refinancing and were told by our bank that we do not qualify as we are too far underwater. We did everything right and thus far we do not qualify for ANY loan forgiveness. In the mean time, we have seen three of the neighbors on our block go into home foreclosure and have to move, thus driving down the value of our home even more.
A month ago, just on the heels of three houses across the street from us going vacant, we had a break-in at our home. The one light at the end of the tunnel is that we live on Charles and Victoria, just two blocks away form what will be an LRT stop. We are hoping that light rail will help to stabilize our home value and bring back people to live in the vacant homes on our block. -- Emily Seru, St. Paul
"I will never pay this off"
I quit my job in October of 2008, thinking I'd find another in a snap. Of course, we know how the last quarter of 2008 unfolded. I soon realized I was not going to work again - and when I turned 62 and aged out of unemployment, I applied to modify my mortgage. It took three years - three tries - and when I finally succeeded, the principle was raised $8k, my interest rate dropped 2.5 points, and the terms were extended from 30 to 40 years.
Essentially, I will NEVER pay this off, and I know it. My mortgage payment, however, was lowered almost $500. The difference has allowed me to stay in my home. If, however, taxes and homeowner insurance rates continue to climb (mine have escalated 30 percent in 2009, 20 percent in 2010), $500 will be gone in a hurry. -- Kristine Holmgren, St. Paul
"Our reluctance to spend any money on home improvements has to be an enormous drag on the economy"
We purchased our home in the early summer of 2007, at the very peak of the market. Since then, we have basically been only been able to pay down the mortgage as fast as the home loses value. We haven't been able to build equity, and we're stuck paying mortgage insurance for as long as we can see.
We are also reluctant to spend money on any improvements to the house, as we feel we will not realize a gain. For similar reasons, we don't pay extra on our mortgage. Even though we're not technically underwater, and I suspect many people are in our situation, our reluctance to spend any money on home improvement has to be an enormous drag on the economy.
The most frustrating thing is, we didn't do anything wrong - we didn't borrow more than we could afford or take on a risky loan. We simply paid the market price for a modest house. If what we have lost in equity over the past four years were forgiven - only 10% of our home value - it would completely change how we view our home. It would go back to being a store of wealth, and an investment. We'd hire contractors and spend money on home improvements. -- Phil Larson, Duluth
"My home value has plummeted"
As a result of the recent financial crisis, my home value has plummeted almost $50,000, leaving it underwater.
I did attempt working with Bank of America to use the Making Homes Affordable program, but they kept me in a constant state of reviewal for over a year before telling me that because I am on Unemployment Insurance (despite it is being supplemented by freelance/seasonal work) that I was not earning an income and didn't qualify for any aid.
They attempted to keep me cycling through the program, but I finally got them to back me out of it. I'm apparently better off making my payments as I always have than attempting any sort of modification with BoA..-- Monte Gruhlke, Champlin
"Our credit rating has been ruined"
We have been trying to get a loan modification from our lender, Citimortgage for over two years. We bought our house in 1999, did some work on it and refinanced in 2002.
In 2003, my husband was diagnosed with cancer. He underwent surgery and returned to work. Six months later his employer laid him off. He has finally returned to work, but it is a lower paying job with no health care benefits.
My job does provide health insurance, but there is no employer match, so we pay $1200 per month.
Our medical expenses are pretty high, but mortgage holders are not required to take these costs into account when they figure out if you qualify for a modification. We have tried four times over the past two years. I can't even begin to detail how insane the process is.
Finally this week we got two letters from Citi, one said, "Sorry you've been denied." The other said, "You have been approved for a trial 3 month loan modification of $1343." Trial loan modifications are the way banks stretch out the process and pretend to be helping the borrower, when in reality they are killing your credit rating. When you go on these trail modification plans, where you pay less, they still charge you late fees for the amount you are not paying, and accrue interest and fines each month. These are reported to credit agencies.
So even if we could possibly get out from under our house, our credit rating has been ruined. We can't sell the house, because we're about $30,000 short. The banks have no incentive to modify your loan because they already got paid. They get that money and they get to resell your house. -- Joy Jacques, Cannon Falls
"I no longer view my home as an investment, but a place to live."
I was laid off in 2009 and didn't get a job for almost 18 months. When I did, it was for much less than I made before. I drained my savings account paying my bills and my mortgage. I have not sought help from my bank or any government agency because I don't qualify.
I've chosen to continue paying my mortgage and stay in my home because I feel it's my responsibility to do so. To rent would be as expensive, if not more. I no longer view my home as an investment, but a place to live. -- Roxie Davis, Buffalo
"For people to be able to succeed, they must also be allowed to fail."
My home value dropped, causing the bank to call the line of credit I had. I had to quickly get another loan when the timing was the worst to do so.
Government should immediately cease all programs designed to prop up debtors with public money. All the efforts to put band aids on this problem will only cause problems with the free market, which has a method to work with failure. For people to be able to succeed, they must also be allowed to fail. -- Brad Hartmann, Osseo
(Thanks to my MPR News colleague Molly Bloom for pulling together these responses.)