The house I sold four years ago is in foreclosure. The bank is considering an offer of $255,000, but the Realtor who is trying to engineer the deal thinks it has about a fifty-fifty chance of going through.
The woman who bought it from me-let’s call her La Viajera, since she seems to have journeyed to the far reaches of common sense’s solar system-paid $211,000 for the four-bedroom house in a 35-year-old centrally located neighborhood. As the bubble blew, she borrowed against make-believe equity and now owes something like $316,000 on it.
Think of that. She put about five grand down on the loan, so her total indebtedness would be around $310,000. Some bank actually lent her that much against an asset worth maybe $250,000.
If the bank gets $255,000 for it and La Viajera has to pay the agent’s fee of about $15,300, then she comes out of the transaction owing around $70,300 for nothing. For air!
Talk about a stupidity epidemic! We know La Viajera, a grown woman with a Ph.D. and a lifetime of street smarts, had some psychological problems that evidently led her to take leave of her senses. But what on earth would possess a bank officer to make an obviously worthless loan?
Oh well.
If in fact the house sells for $255,000, that represents an increase in value of about 5% a year. Not too bad, given the present doom-and-gloom atmosphere. That’s about the increase I figure for the house I’m living in. At least it’s keeping pace with inflation.
Saturday, March 29, 2008
2 Comments
Sadly, this is not unusual at all.
Someone I know very well paid $120k for her house. She now has $320k in mortgages on it. That is nota typo. She refinanced twice, and took out two separate $40k interest only loans. Suffice to say that money is not her strong suit.
The house is now worth about $220k and in foreclosure. Being a smart idiot she got the 2nd mtg (the interest only loans guy) to buy the house from the 1st mtg. It’s the only way the 2nd mtg has any hope of seeing any of his money back, and if he keeps it for awhile it will appreciate back up. It’s in a great neighborhood.
So yes, her credit is totally screwed, but she is walking away owing no money. That’s better than it couldhave been.
Saturday, March 29, 2008 – 10:05 AM
It’s to be hope that La V. walks away from this mess relatively intact, too.
While you could say she was irresponsible to live on a loan against the house and to delay getting a job as long as possible, the fact is she was suffering from psychological issues following a series of traumas that rendered her virtually nonfunctional.
The bank had no business lending a woman who had no means of support more than her collateral was worth. I lay all the blame at the feet of a financial industry whose practices had become so predatory as to be self-destructive.
Sunday, March 30, 2008 – 07:19 AM