Vicki Miller bought her childhood home in Altoona, Pa., from her mother's estate for $32,000, using a nice, traditional mortgage from the local savings and loan.
Seven years later, her debt has more than doubled, her once-significant equity has shrunk to zero and she's behind on her payments. The lender has begun to threaten foreclosure.
"I grew up here. My son grew up here. And I had hoped my grandchildren would grow up here," Miller said woefully.
Miller said she was persuaded to refinance her mortgage twice into sub-prime loans she didn't really understand, along with taking out a second mortgage. As such, she reflects what experts say is the true face of the sub-prime mortgage debacle.
Discussion of the problem often focuses on first-time home buyers who stretched to buy homes they couldn't afford. But experts who've crunched the numbers say 90% of people who took out sub-prime loans from 1998 to 2006 were already homeowners.
Many, like Miller, had conventional, prime loans that were well within their means. What often got them into trouble was that they refinanced their mortgages without really understanding the terms and without realizing that the sales pitches and loan documents were sometimes deliberately opaque to snare the unwary.
The result is thousands of cases like Miller's, in which the damaging outcome is clear but it's very difficult to figure out how it happened or exactly who's to blame.
"I should have just stayed with the loan I had. I realize that now," said Miller, who earns a modest income as an office worker. "I'm not mortgage smart. I've since become mortgage wiser."
Lawmakers debating a mortgage rescue bill have spent a great deal of time trying to make sure that they don't reward careless or greedy mortgage holders. But lawyers working with troubled borrowers say few of them were trying to finance outrageous lifestyles.
Most were like Miller, they say, existing homeowners who found themselves in need of money and responded to aggressive advertising for refinancings.
"There's this myth out there that this was a bunch of people overreaching," said Patrick Cicero, a lawyer with MidPenn Legal Services in Harrisburg, Pa., who represents low-income homeowners who are facing foreclosure.
"But the vast majority of these loans were refinancings," Cicero said. "These were elderly people trying to fix up their homes. These were people lured in by promises of lower monthly payments and the consolidation of their debts who didn't understand they were putting their homes at risk."
When lenders ramped up sub-prime lending in the mid-1990s, it was touted as a way to expand homeownership among people with low incomes or shaky credit histories. And many have pointed to the modest growth of homeownership -- from 64% of households in 1994 to 69% of households by 2005 -- as evidence that sub-prime lending had genuine benefits.
But Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies, notes that most of that expansion in homeownership occurred in the late 1990s, before sub-prime lending exploded.
Elizabeth Renuart, a housing attorney with the National Consumers Law Center in Boston, said many sub-prime lenders and brokers targeted people such as Miller.
They were promised cash, based on the equity in their homes. And the solicitations were rarely clear about the fees and interest rates, advocates for homeowners say.
Moreover, sub-prime loans always charged higher interest rates. That meant bigger commissions for the loan agents and brokers who sold the loans, and provided higher returns to investors who bought securities composed of bundled sub-prime loans.
"It was push marketing," Renuart said. "As the engine revved up from Wall Street to invest in these things, the pressure was on the brokers to make these loans."
Miller, a 52-year-old single mother, is typical of many who ended up with such loans. She was making about $26,000 a year working in the accounts payable office of a local lighting manufacturer. Although the cost of living is lower in Altoona, a town of 47,000 in hardscrabble central Pennsylvania, than it is in major metropolitan areas, the housing boom largely passed Altoona by. Home prices appreciated just 2% to 3% a year for the last decade.
Miller moved into her mother's modest brick-and-siding house in 2001. It had become somewhat run-down in her mother's final years, and Miller quickly piled up debt on repairs. By 2004, she was burdened with about $15,000 in credit card and other debt.
She sought financial help and got phone calls from Ameriquest Mortgage Co. of Orange, the big sub-prime lender that has since collapsed. The sales agent suggested that Miller could pay off her debts by refinancing her mortgage.
In June 2004, her sister was flown to Pittsburgh with a life-threatening brain aneurysm. As a distraught Miller sat in the hospital, she called Ameriquest and said yes to the refinancing.
"My mind wasn't on it," she recalled. "I thought I was getting a good deal, but obviously I wasn't."
Like many others, Miller's goal was not profit but relief from financial pressures.
"People equate sub-prime lending with people getting homes. But I think more of it had to do with access to credit," Harvard's Retsinas said. "This is the way people were trying to make ends meet."
Miller, who discussed her situation in extended interviews and provided a thick bundle of financial records, said she thought her new loan was a fixed-rate mortgage at 7.5% interest. Records show it was an adjustable-rate mortgage with an 8.9% interest rate.
The outstanding principal on her old mortgage had been $32,000. The new mortgage was for $60,000, which covered the cost of the new loan and allowed Miller to take out about $23,000 cash to pay off debts and make home repairs. But her monthly payment nearly doubled to $559.
Months later, a man knocked on Miller's door and said it looked like she needed a new roof. He promised to help her get a loan, and she wound up taking out a second $13,000 mortgage from a different lender to pay for it.
Then in 2006, faced with rising heating bills, Miller decided to spend $5,000 for more energy-efficient windows.
By this time, her mortgage had been sold to Countrywide Financial Corp., and every payment notice suggested that she refinance again.
"Your estimated home equity: $24,818," stated one of many letters and e-mails Countrywide sent her. "You may be able to GET CASH from your home equity. . . ."
Countrywide employees Miller talked to by phone in California sent her forms suggesting that by refinancing her home she could take out $5,000 in cash and her payments wouldn't change.
She mulled over the documents for a month, Miller said, and then one day a notary public showed up at her workplace with what he said were her new mortgage papers. Miller was taken by surprise. The documents didn't look quite the same as the ones she'd received in the mail, Miller said, but the visitor assured her that Countrywide would correct any error.
Miller signed the documents. "I'm a Christian. I'm a trusting person. I believed him," she said.
"I called and called and called and never heard from Countrywide again," Miller said. "I was stuck with the mortgage."
Her monthly payments, now more than $700 a month, constitute more than half her take-home pay. This winter, as her heating bills topped $3,000, Miller fell behind on her mortgage. She's now three months in arrears. Countrywide is offering a "loan modification" that would raise her payments to $1,165.
"How can I afford that?" she asked. "I have asked if I can make partial payments and they say no, it's all or nothing."
Yet each mortgage notice she receives from Countrywide still includes this message:
"If you need cash for your financial needs, now may be a good time to apply to refinance and tap into the equity in your home. Call Countrywide today!"