Foreclosure in Fontana? A 27-year-old ponders walking away
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From a front-page story in today’s LATimes about the impact of the slowing economy on younger workers: ‘Dulce Maya is worried that she won’t be able to squeeze by much longer. The 27-year-old restaurant manager bought a three-bedroom, two-bath house in Fontana for $350,000 two years ago with a $5,000 down payment and an adjustable-rate mortgage.
‘This year, her $2,300 monthly payment will probably rise to $3,300 and her work hours were recently cut because business is slow. Maya has asked her bank to lower her payments so she can keep her house, which is now valued at $200,000, and expects to hear back in the next few weeks. If it doesn’t agree, she says, she may have no choice but to hand the bank the keys.
‘’I don’t know what happens next,’ Maya said. ‘I may try and rent an apartment for around what I’m paying, but rents are going up too.’
Random thoughts and bloviations:
1) The estimated decline in the value of the house is 42%. In two years.
2) Is this mortgage salvagable? And should it be saved? The Dodd-Frank plan, as I understand it, would offer the lender the following deal: The government will guarantee a new mortgage at 85% of current appraised value, or $170,000. That would certainly make payments more affordable: roughly $1,100 per month for a 30-year-fixed at 6%. This appears to be a pretty good deal for the homeowner.
But it raises questions: Is a lender going to take $170,000 for a $345,000 loan? (It’s more complicated than that: There are probably two lenders involved.) And what are the neighbors going to think? I’m talking about the neighbors who have just dropped their cable TV service and taken part-time work so they can pay their $3,300 mortgage on a similar house. Kinda makes them feel pretty silly if the house can be had for one-third of what they’re paying.
3) In a long newspaper article about economic trends, the best anecdote is often at the bottom of the story. This one was.
Your thoughts? Comments? Feel free to correct my interpretation of the Frank bill. E-mail story tips to peter.viles@latimes.com.
Photo Credit: LATimes.