I’m sorry, I wanted to edit this down, but it’s too darn juicy. From the Bloomberg article:
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Tom LeTendre, 47, a food services warehouse operations manager, and his wife Diane, 50, lived well in the years after their 1998 purchase of a $98,000 home on the west side of Phoenix. “We were very comfortable. We went to dinner when we felt like it. We bought the things we needed to enjoy life,” he said in an interview.
Over the next few years, as home prices rose, the LeTendres repeatedly borrowed against their home. They refinanced into an adjustable-rate mortgage for the final time in 2006, a year that saw Phoenix prices jump more than 40 percent. Today, with an annual household income of about $80,000, they owe about $260,000 and have stopped paying their mortgage. Homes in their neighborhood have sold recently for $45,000 to $65,000, according to Zillow.com.
…As recently as 2007, the LeTendres used their housing equity to pay a $25,000 dental bill, fund a Caribbean cruise and cover thousands of dollars in home improvements. Tom LeTendre, now hoping his bank will permit him to dump the house for whatever the market will bear and walk away, was a regular customer at the local Home Depot, spending freely as he took down an interior wall, extended a carport roof and did some cabinet work. He rarely patronizes the store these days; on his last visit, he spent $8. ”
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Nope sorry, no pity for these folks:
1. If they were “very comfortable,” then why did they need to HELOC to death? Sounds like they caught the uncomfortable greed bug.
2. I don’t buy the sob story about the dental bill. Say in 2000 they had an income of $60K or so. A $98K house is a monthly payment of ~650 PITI. Over the next booming 5 years, they couldn’t save $25K cash some other way? No emergency fund? No dental insurance at all?
3. If they owe $260, then they must have taken out at least $160K in cash. $25K dental and say $5K for the cruise. What IDIOT evidently has no emergency fund for his teeth, but puts $120K or so into a $98K house? And no, extending a carport roof doesn’t cost that much. (Carport? Why not a garage?)
4. Even after their irresponsibility, they have an income of $80K and owe $260K. That’s still only 3x income, which is fully affordable by anybody’s standards. No bank will allow them a short sale. I know I wouldn’t.
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