So says Citi Bank! A lose-lose for everyone.
An apology to all those who come to my blog: Red Diaper Baby for Blacklist reminiscence. This isn’t that. But the thread is my mother, a Communist-leaning activist who nonetheless would’ve been devastated by the mortgage crises as it developed in 2008. Luckily for her, she died a few months before the bottom fell out.
My mother, Madeline, may have been a Trotskyite but when it came to real estate she was a carnal capitalist. She drove Jack crazy by investing in more acreage and a bigger house in Connecticut and moving out of a rent controlled (gasp) 11-room apartment in Greenwich Village in 1974 to buy a co-op in a converted bread factory in the now tragically hip “meat district” for $250,000—a king’s ransom in those days.
She never saw it coming, dying in April, 2008, leaving her incredible Connecticut spread to fall into foreclosure and her beloved Greenwich Village Co-op to become a causality of a short sale. ** Two weeks before she died she said, “Lisa, I want to die in this house.” I said, “Ma, don’t worry, you will.” And she did.
She drummed into my head, “You can never lose on real estate.” So for the last 40 years I’ve bought, improved and sold seven houses, all for a tidy profit. But now…along comes 2008, and due to no fault of my own, or other homeowners, the house I bought for $240,000 in 2004, rebuilt and renovated in 2005 and reappraised for $475,000 in 2006 was reduced to $399,000 3 years later in 2009! How could that be?
The Obama Administration saw the unfair nature of the situation and offered the “HAM” product: “Home Assistance Mortgage.” Government-backed guarantees to mortgage companies to help us out—Quickly. The purpose of the program was to reduce interest rates on existing mortgages. After all, the Feds were reducing interest rates on everything, why not mortgages? The point was to help homeowners pay more principal and play “catch up” on the devalue of their homes.
The government assured homeowners that the process would be quick. I was one of the first to apply for a HAM with CitiBank —guaranteed to take less than 3 months. It took 18 months. I jumped through every hoop, faxed every piece of paper requested, dealt with “lost financial packages” sent Fed Ex, duplicated every application a dozen times, called functionaries, supervisors, was put on hold for hours….but I got one! I got a HAM. They converted my 7% 30-year fixed to 3.65%. I was thrilled.
Then the unthinkable…. In 2010, CitiMortgage did a “Google Fly By” appraisal and downgraded my home to $230,000…$10,000 less than I bought it for in 2004. And I wasn’t alone.
I live in a desirable neighborhood, on a unique street where every house was built in 1951 by a woman architect who studied under Eichler. Mid-Century Modern is the term used to describe the 20 houses on Ivy Street. My nextdoor neighbor listed her house for $389,000 a year ago. No takers. She’s now reduced the price to $230,000. My neighbor across the street listed his house for $280,000 but reduced the price to $250,000. Two houses down, the couple bought the house for $214,000 a few months ago—and so it goes.
A ray of light appeared when the New York Times ran a front page story on a new program being embraced by the mortgage banks: Principle Reduction Assistant, (PRA) available to homeowners who are current on their mortgages but whose mortgages are “under water,” meaning the value is 115% below the current mortgage. The government is providing assistance to banks to forgive principle for those people who are “at risk” of walking away from their house. I call Citi Mortgage the next day only to be told my account must be “unlocked.” Call back in 10 days. I call back in 10 days. No body “unlocked it.” Call back in 10 days. Then another 10 days and another. After two months I escalate the request. That’s the term I’ve learned to deal with inequities of all kinds and with all creditors.
But now my line is this: “The lady next door will rent me her house for $1200 per month. I don’t have to fix her roof or mow her lawn. It’s not my problem. Why should I stay next door, in my house and pay $2400 in mortgage payment every month, paying thousands more in keeping up the house when it will never again be worth what I owe- $389,000. Especially at 65 years old! No kids home. I live here alone. All I’d have to do is pack a few boxes and move a few animals…next door. I anyone listening?
I spoke to a supervisor yesterday who told me that although, “they didn’t want my house back” I already had a “HAM” so couldn’t apply for another one, even though this one wasn’t available even 3 months ago. I would’ve applied for this one, but it wasn’t available. No matter how much I put into this house it will never be worth what it was mortgaged at 5 years ago. So why shouldn’t I simply move next door, pay rent and give this house back to the bank? I reasoned that if they gave me a reduction in principle they would be losing less than if I walked away and they had to sell this house.
I told them that even if housing prices recovered, it may take 10 years—I’d be 75 years old. I don’t want to saddle my children with having to short sell my home, or worse see it go into foreclosure because the gap between what I owe and what they can sell it for is over $100,000.
So far, they’re not listening to me. Or to Martin Feldstein, an economist from Harvard who said (on Charlie Rose) that the only way homeowners can become consumers again is to give us the PRA.
Stay tuned. I’m not giving up. I’ve got nothing to lose. I can always move next door and watch my home fall into disrepair as the bank tries to sell it. It’s a lose-lose.
And now for your practically useless piece of information, as if the preceding blog were not enough—put a cup of white vinegar in your dishwasher once a month and run it. Better than all those expensive dishwasher cleaners and better for the environment.
Lisa Gilford
**My mother’s incompetent executor did the short sale. Didn’t need to be so days the real estate agent and the other co-op owners.