Owning homes on borrowed time (many homeowners stuck with bad loans)

[Herman Munster]

http://www.palmbeachpost.com/business/content/business/epaper/2006/12/25/m1bz_mortgageoption_1225.html

Every day, Will Hertzberg owns a little less of his three-bedroom house in Corona, Calif.

Like hundreds of thousands of other homeowners around the state, Hertzberg has a mortgage that lets him choose how much he pays each month.

Like many of them, he always chooses to pay as little as possible.

For the moment, this allows the 56-year-old Hertzberg to continue living in his tract home despite being only marginally employed. But his debt is swelling, and his mortgage company controls his fate.

"I am rather screwed," he said.

Alarmed regulators recently have attempted to force lenders to cut back on loans such as Hertzberg's. Even some industry executives are beginning to wonder how these borrowers will handle their added debt, especially if housing prices stay flat or fall.

If it turns out that many can't, it would be a major blow to the housing market. In the worst case, it could drag down the overall economy.

Hertzberg could sell now, but his lender would charge him an $11,034 prepayment penalty - money he doesn't have. Yet if he stays, the housing market may tank, vaporizing what little equity he has left.

"I made choices, and they happened to be the wrong choices," Hertzberg said.

[LARED]

1. Sounds like he is continuing ot make bad choices

At some point early on he should have sold and moved to someplace he could afford.

I feel sorry for the guy, but no one twisted his arm to do this.

[lvasconcellos]

2. Here in San Diego...

I have friends that are in this same boat. A loan that was within reason is now cause for consternation. It's true they were lured by the initial low rate. Sad to think the bankruptcy rate will continue rise... Meanwhile, insurance , bank, and investment fat cats are rolling in it. Did you get a load of Goldman Sachs "Christmas bonus"? It's enough to provide health care to kids in some African nations. Really disgusting...

[theoldman]

3. Yes, he made the wrong choice.

Like a million or more people he got greedy and bought a house beyond his means. I live in Texas where we are having record high foreclosures. Most of the time it is because people bought a house that they could not afford. Fortunately they generally only loose their down payment which in some cases is zero.

[karlrschneider]

4. Yeah, this guy is a real fuckin' genius:

"Hertzberg's home equity paid off his credit cards, financed trips around the world that allowed him to indulge his passion for photography, bought a $32,000 Toyota Avalon and enabled some lousy investments."
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On second thought, he's a moran.

[Wcross]

5. A regular Einstein!

He failed to accept the fact that borrowed money HAS to be paid back some day. I guess he figured housing prices would continue to climb forever?

[cornermouse]

6. "figured housing prices would continue to climb forever"

Would that be anything like expecting the stock market to climb forever?

[karlrschneider]

7. Very much like that...as would expecting ANYTHING to be forever.

;-)

[Wcross]

8. Money can be made in a falling market, unlike a home.

Realestate isn't all that liquid whereas stocks can be sold in less than a minute. You can make money in a falling market in many different ways. I would put my investment dollars at risk, I wouldn't play with my home though!

[hatrack]

13. The four most dangerous words in the world of the easily deceived:

"This time it's different!"

:eyes:

[SoCalDem]

9. He's have been better off to declare bankruptcy,

eat the loss of the house, and move to a place he could afford..

Turning unsecured (back then) credit card debt into a 30+ year mortgage debt was a stupid move.. big time..
People are going to have to re-evaluate their housing dilemmas. More shared housing, for longer periods of time might be a solution..or people will just have to give up on the idea of "owning" a house.

That's a misnomer anyway.. You don;t "own" it until the bank/mortgage company gets paid off anyway..and even then, rising property taxes can be more than some people can afford..

[Ishoutandscream2]

10. 32,000 car? Trip around the world?

Greedy, greedy, greedy. Now he's paying the price.

Yes, gotta be a Bushbot Republican.

[high density]

14. Plus he probably imagined tax writeoffs with the H.E. loan

I'd never sign docs on a loan that had a pre-payment penalty. What a 'tard. $32,000 Toyotas are crazy as well. My aunt has one and IMHO there are much better cars in that price range.

[seriousstan]

11. A fool and his money.......

boo fucking hoo.

[Wcross]

12. A fool and THE BANKS money........

He is 11k in the hole which he can't pay. I don't mind when a fool loses his own money but spending money you can't pay back is borderline criminal. Granted, the bank wasn't too bright over lending to him but they will just pass that "mistake" on to the rest of us.