Wikinvest Wire

Questionable stories of life after foreclosure

Friday, August 21, 2009

There's an interesting piece up over at Money Magazine (hat tip TK) about life after foreclosure for four families - two in California, one in Illinois, and one in Colorado. Aside from the obvious human interest aspect and the fact that at least two families had help from, what is most intriguing is how personal spending excess in California is downplayed or omitted entirely.

First, here's Lori and Bill DiBacco from just north of San Diego:

City: Oceanside, Calif.
Price paid: $610,000
Current value: $550,000
Lesson: "It was so horrible, the worst stress we'd ever been under."

Apparel sales rep Lori DiBacco and her musician husband, Bill, were living a dream life in their five-bed, three-bath home with pool in beautiful Oceanside, Calif. They bought the place in 1994, and they lived well, but not wisely.
So, the first thing that anyone remotely familiar with the California housing market should notice about the story above is that the "Price paid" as stated is really the "amount owed" - something that is clarified later in the story and makes all the difference in the world when it comes to personal spending excess.

An educated guess is that this couple paid about $200,000 back in 1994, meaning that these two managed to spend more than $400,000 in home equity over the last 15 years, most of it likely coming between about 2003 and 2007 during the peak years of the housing bubble when home equity was being spent freely in the state.
"We took great vacations, if we saw something we wanted we bought it," says Lori.

The couple was childless by choice, as they both traveled for work. Then, five years ago, their goddaughter came to live with them. That radically altered everything.

Bill stopped working so someone would be home, which halved the couple's income. Then, there were big expenses for taking care of the child.

"She needed a lot of extra care," Lori says. "We put a lot of money into her education, dropping $50,000 the first year into Sylvan Learning Center for remedial work."

The coup-de-grace happened when Lori injured her back and couldn't work.

They burned through their savings and took out a second loan on the house. Their monthly mortgage bill, about $1,400 when they first bought the house, ballooned to $4,400. They started missing payments; they simply didn't have the money. They went nine months without paying.

"Oh my God, it was so horrible, the worst stress we'd ever been under," Lori says. "It sent my husband over the edge to a nervous breakdown."

By the time they were done, they owed $610,000 on a property that was worth just $550,000 when they did a short sale last year.
Things are much better now. Bill runs a business restoring classic Mustangs, and Lori started a pet concierge business, which arranges everything for the pampered pet. She calls working with animals her dream job.

Their finances are still tattered. They were turned down for several places they tried to rent. They're living in a condo owned by Bill's mom, paying a small rent but fixing the place up. Lori loves the new place; it's in a quiet 55-plus community with very nice neighbors, most of whom have pets.

"We almost divorced many times over the stress of the financial burden and all that entailed," Lori says.
I don't know. The DiBaccos come off as hapless victims here and the worst the author can say about them is that they didn't spend their money "wisely".

Clearly, there's some progress being made here, but not nearly enough.

The other story about life after a California foreclosure is even worse than the first in that there's not even a hint of the former homeowner being at least partly responsible.

Also from just north of San Diego, Ron Nash:
City: Carlsbad, Calif.
Price paid: $840,000
Current value: $600,000
Lesson: "Nothing was lost but a big, freaking headache."

This California resident bought his house nine years ago in a gated community within the posh, seaside city of Carlsbad. He took out an adjustable rate mortgage to keep the initial monthly payments affordable, but by this spring his monthly mortgage bill was $5,600.

At the same time, he found himself severely underwater thanks to falling home prices and several cash-out refinances.

The headhunter and motivational speaker couldn't afford that big a payment and realized he wasn't likely to make back nearly a quarter-million dollars in value. He tried for months to work something out with his lender, but he says, "They made me an offer that was unacceptable."

Instead, Nash, who is married with two kids, decided to go through the foreclosure process. He didn't pay the mortgage for 18 months and finally vacated in June. Not having a housing payment during that time kept him from financial ruin since his headhunting business was in a tailspin.

Nash and his family are now living in a $1,900-a-month rented townhouse in the same great neighborhood just a half mile away from their former home. "I downsized about 1,000 square feet to a 1,500-square-foot home," he says. "Hey! It's a lot easier to clean."

He feels like he landed on his feet in just about every way: His kids were able to stay in the same school; he stayed in the same location, which is like living in a beach resort; and he's spending a lot less on housing. "Nothing was lost but a big, freaking headache," he says.

Still, he counts himself lucky that he was able to find the new place. Most large-scale commercial property complexes wouldn't rent to him because his credit was so tattered, but he found a woman who had just lost her job and needed to leave her townhouse on short notice. He had just received a big check for a head-hunting transaction he had just closed so he got the place.

His advice for others: "Make sure you take care of your family. And don't get attached to mere things."
Once again, the Price paid here is really the amount owed and it looks like Ron's loan value had ballooned to $840K as prices in San Diego peaked, meaning that, he too probably spent about $400K of his home equity, assuming that home values about doubled between 2000 and the market peak a few years back - a reasonable assumption.

Is this how we all move on after the biggest financial bubble in history pops?

By just ignoring individual responsibility?

Apparently so...

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Jones said...

At their current price levels, these homes are still way overvalued.

Anonymous said...

As much as I abhor the level of greed and stupidity which drove these morons into such debt, I think we should select 10,000 of these idiots and bail them out entirely.

Why, you ask? To show the country just how frickin' obscene and disgusting the bailout of Wall Street is. And then, to show just how obscene it all is, we appoint these 10,000 as Official Federal Real Estate Agents who get a mandatory 3% of every transaction in their respective states.

Do you think Wall Street and Congress would criticize such a plan? Would we then, finally, be allowed to beat them with nail-studded baseball bats? just asking, ya know, just in case.


Anonymous said...

Well, the house price are absurd. The spending level of these people is absurd. Absurdity all around. What do you do when faced with an absurd world? Live absurdly.

albrt said...

This seems kind of tame. Couldn't the magazine find anyone who flipped multiple houses by 2004, then moved on to intentional mortgage fraud to buy several dozen more by 2006, then killed all their co-conspirators and buried their bodies in the basements of the houses in 2007, then was appointed to a policy position at the Treasury Department in 2008, and is now getting a multi-million dollar quarterly bonus working at AIG?

Anonymous said...


You said it. Yet, the reality is even more obscene than that. If you think about how fractional reserve lending works with the central bank, it is what allows all that risk taking to occur in the first place. This take power that should belong to the depositers (savers) and gives it to the bankers. Ever wonder why mortgage interest is tax deductible when most other interest paid is not? That's right, it inflates bank profits and home prices.

Anonymous said...

What a joke. Wait - the joke is on me!

My life and lifestyle has been affected by the irresponsible actions of millions of these dumb asses.

We're all connected. Now I'm pissed.

walex said...

«irresponsible actions of millions of these dumb asses.»

Dumbassses? They have had a wonderful 10-15 years, and then they got out essentially whole.

And the guys who helped them along? They, whether the local mortgage salesmen, their managers, the finance wizards who packaged the loans, and so on, cashed huge fat bonuses on a high salary for the same period.

«the joke is on me! »


The Real Deal said...

Blogs are full of stories of housing excess, stupidity, tragedies.

Those storied here got less than what they deserved, after foreclosure. Because they were able to just walk away, and skipping a huge chuck of responsibility. They did cash out rising equity, and enjoy the good life big time without earning it. When it's time to pay, they walked.

A culture of profound financial irresponsibility inflicted America, from the politicians, to business executives, to Wall Street, to Joe Blow in the side street. Even today, after the mess, little has changed. The big guys got bailouts while the little guys just walked.

MassHomeHelp said...

This is really sad because Foreclosure can destroy so many people's lives. Foreclosure should never be an option - Nor should the banks allow it to get that far.

There really are a good number of people trying to pay something, but the banks aren't very friendly unless you know how to play their little inside game.

Golden rule: If you are already late on the payments, the banks will be more likely to talk to you. If you are current on payments, but lost your job - they won't.

1. Create list of your expenses in a spreadsheet.

2. Gather copies of bills, proof of income and bank statements

3. Write your hardship letter

It can be a long hard road to go down, but it’s much easier with a step-by-step plan.

For FREE videos on how to Think & Grow Rich to change your financial situation visit:

Get help

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