Almost every song ever written. Make up your own tune.
How a Financial Pro Lost His House
By CARL RICHARDS | New York Times –
Wed, Nov 9, 2011 2:10 PM EST
I felt we could afford around $350,000. We called a real estate agent named Mitch, who had signs on all the bus stops: Talk to Mitch! He picked us up in a gold Jaguar, and suddenly we were looking at houses that listed at $500,000 or more.
It felt a little crazy to be shopping for houses that cost half a million dollars, but my income was growing rapidly. Everywhere I looked, people were being rewarded for buying as much house as they could possibly afford, and then some. There was this excitement in the air, almost like static. I started to think that if I didn’t buy a house right then, I would never be able to afford one.
At moments during our house hunt, I felt in my gut that something wasn’t right. We’d go to open houses for $400,000 homes and see lines of couples in their late 20s — younger than we were — waiting to get inside. I kept wondering where all the money was coming from. How did all these people make so much?
But prices just kept rising, and when people kept buying, that made it seem safer. I knew from my work as a financial adviser that following the crowd could be costly. But like everyone else, I felt safer in a crowd.
The market’s continued strength meant we could borrow even more. It was easy. In late 2004, a year after buying the house, we refinanced our mortgage with World Savings Bank, which later ended up in the hands of Wells Fargo, using one of the pick-a-payment loans that let you choose your own payment each month.
We picked the lowest possible payment, the one that added to our balance each month instead of subtracting from it. And we added a line of credit with Wells Fargo.
But in hindsight it is clear that we were spending more than we should have on things like recreational gear and family trips for ourselves and our four children.
It was extravagant, but it seemed modest compared to what some of our neighbors were doing. Our house was the smallest model in the neighborhood (though at 3,500 square feet it was hardly tiny), and we drove a Chevy and a VW. Cori and I and some of our friends had a lot of conversations comparing our spending habits to those around us. How can so-and-so afford a boat? How are people buying new trucks and four-wheelers and 5,000-square-foot homes? Do they know something we don’t know?
By then, housing prices in Las Vegas were falling quickly, and the bank had cut off our home equity line of credit. We quickly got rid of a car and stopped taking trips. I moved into a smaller workspace and cut back on my administrative and marketing costs. Even so, we found ourselves using credit cards as emergency stopgaps.
Then, the sickness set in. The pain would start in my stomach, and then I’d spend six hours vomiting. It happened once, then three months later it happened again, then one month later it happened yet again. Eventually, it was happening every couple of weeks. The doctors couldn’t find a physical cause.
Because I have a moral obligation, I said. You pay your debts.
He proceeded to explain that I didn’t have a moral obligation to the bank. I had a moral obligation to my family. I had a contractual obligation to the bank, along with a clear moral obligation to be honest in my dealings. What he was asking was this: Which is more important? Your contractual obligation to the bank or your obligation to your family to preserve your ability to make a living?
A bank representative came to the house and met with us. He was such a nice guy. Cori had treated it like an open house, and the place was spotless. The guy said he’d never met anyone more qualified for their short sale program.
Somehow, even in that horrid market, we sold the home for $531,000. That was in late August 2010. In exchange, the lender released us from both our first and second mortgages. Today, Zillow estimates the home’s value at $505,000.
http://finance.yahoo.com/news/financial-pro-lost-house-191003606.html - 195k
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