Saturday, April 14, 2007

"No Worse Place than the Sacramento Region"

From Fox 40:

Home foreclosures are rising across the country and there is no worse place than the Sacramento region. The latest figures show four of the top ten metro areas in the nation are right here. Those locations are Sacramento, Stockton/Lodi, Modesto and Yuba City. These cities have the highest incidents of sub-prime loan delinquencies in the country.
...
And one local retired woman fears she'll lose her home because of a mortgage loan she says she was scammed into. Netta Savage worked nearly 40 years in Oakland, raised her children there and is in now in her late 60s. Now living in this retirement community in Rio Vista, she believes she was scammed into her home loan, and that she is not alone. Savage said, "Under duress, you do dumb things. So I accept my responsibility. I should have said, 'I'm not signing nothing. We need to take this home, and let me get with someone.' But he's saying sign it, sign it. It's what we agreed on. It's what we agreed on. Sign it, sign it, sign it. And I'm like...okay."

Now into the second year of her loan, which got her this Rio Vista home in the Trilogy retirement community, Savage's mortgage payments exceed her monthly fixed income of $2,000. When her flexible interest rate went up, her monthly payment went from $1,300 to close $3,000 in less than 2-years.

6 comments:

Rob Dawg said...

Yep, put grandma's face on the crisis. 60 year olds on fixed incomes of less than $30,000/yr don't buy houses with large mortgages in Sacramento, California. Grandma went looking to buy the house before she went to sign a mortgage.

Jeff said...

Great points Rob. Plus the f'ing media, while I"m glad they are covering this RE mess, they should talk more about the morons who were greedy and should have known better. They make it sound like everyone's been a victim over the past 7+ years of the RE boom. Yea, no one was a victim with Johnny and Suzie were buying Hummers and Range Rovers with their phoney bologna home equity loans.

paranoid renter said...

Maybe the govt. will start allowing refinancing of these into 40 or 50 year fixed loans so we can delay the crash.

Gwynster said...

PR,

I don't know that a 40 or 50 will save people. No one seemed to consider how stated incomes were effecting pricing and now we have people making 75K household income in 550K homes.

If people are overleveraged by a little, they can work a second job or make budget cuts to make up the difference. I think people are way out of funds. It's like the old days when you came to the edge of a map - beyond this point there be dragons.

Patient Renter said...

If the govt. *must* create a bailout, the one thing I might be okay with is forcing lenders to eliminate prepayment penalties so that homeowners can refinance out of nasty loans. If someone wants to refinance and can afford the payment afterwords, that's fine with me. If they wouldn't be able to afford the payment even if they could refinance, they're still going to end up in forclosure anyways.

I think this is a fair balance.

Happy Sam said...

The basic problem with a 40/50 year loan vs. 30 is that the numbers don't work in a meaningful way.

I had to guess a bit, but it looks like she got one of those option arms with a 1% teaser on a $400,000 loan; that's $1,286.56 a month.

It looks like it will jump to 9.25% (stated income/low FICO?) which makes it $3,290.70.

If she refi'd at 5.80 (from Bankratemonitor) for 30 years, she'd be at $2,347.01 - Oops, 347 over her income. At 40 years, $2,145.35, Hmmm 145 more than income. At 50 years -- $2,046.74.

Even if you went out to a 100 year amortization, she'd still be at $1,939.29. Hardly enough left over for anything.

The mortgage industry preyed upon an uneducated sould who was only too happy to beleive the impossible.

Makes me sick