I heard this on the radio on my way home last week. A lady called a talk show program about her foreclosure story. I’m paraphrasing here:
The bank foreclosed my home recently. It was my family home of 35 years. I raised my kids in it. I love it. The bank was WaMu. I begged them to let me keep it but they wouldn’t work with me. I had a loan of $745,000. They sold the house for a little over $300,000.
Whenever the media talks about foreclosures, I conjure up an image of first-time buyers who bought their home in the last few years. They paid the market price at the time, which turns out to be too high by today’s standard. They got an adjustable rate mortgage with a teaser rate. After the rate reset to fully indexed rate, they couldn’t pay the full monthly payment. This story on the radio reminded me that’s not always the case. People can refinance themselves to foreclosure too.
I wasn’t able to find statistics on foreclosures from purchase loans versus from refinance loans. But because there are far more refinance loans than purchase loans, I’m guessing there are also more foreclosures from refinance loans than from purchase loans. In the case of this lady who called the radio program, she lived in the house for 35 years. 35 years ago, the house was probably worth less than $50k. If she took out a 30-year loan at that time, it should’ve been paid off already. She would’ve owned the home free and clear. What was she doing with WaMu on a house she owned free and clear? How could a house purchased for less than $50k end up having a $745k loan? Where did the money go?
Who’s the victim of this foreclosure, the lady or the bank? After taking so much money from her home, she calls the radio program complaining about how unfair the bank was. The best way to prevent foreclosure is paying the bank per the loan agreement. The bank is not interested in taking any house. The bank is interested in getting paid as promised.