How One Family Descended Into The Nightmare of a Foreclosure
"We're into the last leg of our foreclosure. Once the mortgage company has gotten you out of the house, then the sale date is posted. You basically have no more shot at that point," says Lisa (who asked that we not use her real name). When we spoke with this 35-year-old wife and mother of four, her house was just a few weeks away from being auctioned off on the town's courthouse steps.
"Several years ago, we bought our first house. We'd rented until then and hated renting. (My husband) was the only one working, and we had two kids at the time. We were getting by OK, and I didn't want to work so I could take care of the kids. We were able to eek by and it was a fixed loan. I never went for an adjustable loan," says Lisa.
Refinancing Their Way Into Trouble
"We started having problems with our cars and had to get two new ones. So we refinanced the house and put the car expenses into the house loan. Real estate prices were skyrocketing, so it was easy," says Lisa.
Then the family grew to a third child and then a fourth. "I talked to my real estate agent and lender, who was the same person. I guess that's a conflict of interest. We were talking to her about moving after the fourth baby and getting a larger house. The agent really pushed us to list our house. I was always the one who was more cynical and negative. But we had already listed the house, so we just went for it."
"We did not get an adjustable. We got a fixed rate," says Lisa. "The payments were still kinda tough, and we also had a second mortgage." In total she says they were paying about $2,100 a month. "Then we got into a cycle of refinancing to pull money out and cover the bills we couldn't cover," says Lisa. She estimates that they eventually refinanced around six times.
Those Little Checks That Come in the Mail
"We would pull out as much as we possibly could (when we refinanced) to pay down credit card bills. We were using our credit cards to pay the bills. They give you those little checks in the mail and so I used those to pay the mortgage," says Lisa. She also points out that she and her husband were always careful to pay bills on time so as to maintain high credit scores. "We were neurotic about paying our bills on time."
One Late Credit Card Payment Tipped the Scales
Lisa says she had most of her credit cards from the same company. Then she made one late payment, and they raised the interest rate on all the cards. "I forgot to pay one account and wound up paying late. So they raised my interest rates way up. I had at least three cards with $20,000 on each and they were full! The minimum monthly payment was like $750 for one of the cards and like $530 for one of the others." Considering that their monthly mortgage payments at this point were more than $2,000, there was little left over for expenses.
Continued on Page 2: How One Family Descended Into The Nightmare of a Foreclosure