A foreclosure story I can't feel badly about

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To hear the media tell it, the consumers who are losing their homes to foreclosures are all victims. They're victims of mortgage companies, real estate agents, banks, and the real estate industry. It does not matter whether or not they could afford the houses they bought or refinanced, so long as there's another person or company to blame.

Yet the San Francisco Chronicle apparently wants us to feel sorry for Joann Gardner, who is turning over her keys in exchange for an incentive payment, often referred to as "cash for keys." (It's the mortgage company's way of making sure that these "victims" don't destroy the houses on their way out.)

So how did Gardner get into so much trouble that she's losing the house? Her parents bought the house in 1954 for $11,500. They had no trouble affording the mortgage payments. Then Joann and her brother decided to refinance the house multiple times.

The last refinance was at the end of 2006, for $454,000. And the last time they made a payment on the mortgage? December 2006. So we're supposed to feel sorry for people who cashed out of the house to the tune of almost half a million dollars, and didn't make hardly any payments? Not to mention that they've apparently been living in the house for free for the last 18 months or so.

Oh... And that last refinance put the family at a monthly payment of $3,362, when their household income was $3,144. Simple math here. I can't see how something like this can be blamed on anyone except Joann and her brother. Oh sure, she says she was caring for her parents who still lived in the home, and therefore didn't have a job. Still, how did the family spend all this cash from the multiple refinances? It makes little sense.

Joann says the refinance money went to pay some credit cards and toward loan fees. The numbers just don't seem to add up, and I can't bring myself to feel too sorry for her. But the good news is that Joann is now considering getting a job.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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