Monday, May 12, 2008

People Who Don't Deserve Government Help To Keep The Home Financed By Greedy Thieves

Our Leaders' (and President McCain's) policy: getting victim and criminal confused. (It's a result of course of taking money from the thieves to ensure that thay are not perceived as criminals.)

Faux Bidness Journal:
The Borrowers: Sherrie Floyd, 44, a clerical assistant at the Kaiser Foundation, and her husband, Kevin Floyd, 45, a truck driver in Vallejo, Calif.

The House: In June 1995, the Floyds bought a four bedroom, 2,100 square foot home in Vallejo at auction for $170,000. After cashing out of Mr. Floyd's retirement fund, they put $11,000 down and financed the rest with a 30-year, fixed-rate mortgage from Countrywide. Their monthly payment was $1,500; the rate slightly under 9%.

Current Status: After refinancing several times, their monthly payments reached an unaffordable $5,600. They stopped paying in April 2007 and filed for bankruptcy in December 2007. A hearing in bankruptcy court is scheduled for Monday.

The Debt: The Floyds owe $670,000 in credit card, mortgage and auto-loan debts, according to the claim estimate from bankruptcy court. Since 1995, Mrs. Floyd estimates that they pulled roughly $100,000 out of their mortgage to pay off credit-card bills, broker fees and penalties.

Background: In 1999, Mr. Floyd had an operation on his knee. He missed six months of work and the couple fell behind on their payments. They filed for a Chapter 13 bankruptcy and the court set up a payment plan. They followed it for two years.

In 2001, Mr. Floyd contacted a mortgage broker who offered to refinance their home. The Floyds say that he claimed this would help them pay off their debt and get their credit back on track more quickly. They refinanced into an adjustable-rate mortgage that year and again in 2003.

In 2005, just as their rate was about to go up, Mrs. Floyd got pregnant with her fifth child. It was a high-risk pregnancy, and she switched to part-time work -- taking a substantial salary cut.

They refinanced again through Option One Mortgage, a subsidiary of H&R Block. (Earlier this month, H&R Block completed the $1.3 billion sale of Option One to American Home Mortgage Servicing Inc., owned by billionaire and distressed-asset investor Wilbur Ross.)

At the time, their house was appraised at $610,000. They took out a $505,000 loan -- roughly $452,000 went to pay off their prior loan, about $15,600 went to other outstanding debts and fees and the Floyds took out almost $23,000 in cash. (Their house was recently reappraised at $470,000. See info on local housing prices.)

The Floyds say their broker explained that their new mortgage would be at 7.25% for two years and go up to 8.25% for the next 30 years.

But in 2007, the loan went up to 9.25%, bringing monthly payments from $3,200 to $3,980. It later went up to 10.25% and a $4,367 payment. The couple then learned that their mortgage rate would increase every six months until it reached 13.25%.

Mrs. Floyd says that the broker misinformed them. "We take responsibility for our situation. But if you don't understand loans, a lot of brokers take advantage of you," she says. "I think my husband was talked into a lot of bad things."

An Option One spokesperson says that the company disclosed the loan appropriately on the Truth In Lending Agreement, signed by the Floyds on June 16, 2005. The mortgage company also says they provided the Floyds with a consumer handbook explaining adjustable-rate mortgages and a Summary of the Terms of Your Loan disclosure stating that they were signing an ARM loan.

By December, the Floyds monthly payments, including back payment fees, reached $5,600. Mrs. Floyd has since asked Option One for loan modification. The couple also contacted Hope Now, a coalition of mortgage companies, investors and credit counselors. But the group said that they couldn't help the Floyds because they'd missed too many months of payments.

The Floyds have filed for a Chapter 7 bankruptcy -- instead of agreeing to a payment plan and retaining their assets; they will have to sell off their house and use the proceeds to pay off their debts.

Through a spokesperson, Option One said that if the Floyds filed a reaffirmation agreement -- a contract indicating that they would pay some of the money they owned despite the bankruptcy -- the company would be "eager to begin a second loan modification and work with them to find a solution to keep them in their home."

That will be close to impossible, the Floyds say. Currently, they are trying to find a rental. So far, landlords have been turned off by their credit rating. The couple will likely have to move in mid-June, about a month after Option One's May 21 court date to reclaim the house.

The family of seven plans to split up and stay with different relatives until they can find a new home. "I want to pay my debt. I pay my federal and state taxes like I'm supposed to, I go to work, and I just can't find any help," said Ms. Floyd. "It just isn't fair."
(Emphasis added.)

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