No refuge from the mortgage crisis
From the front door of the house to the back is a straight shot unbroken by walls, handy for pacing, 24 steps each way.
It is a small house on a small lot in Highland Park, a Los Angeles neighborhood that was on its way up until the recession. The house has not always been well tended: It’s old and a bit shabby, but it stands pretty much foursquare.
I bought it in 2005 for $503,000, most of it borrowed, and lived there six years, longer than I’d lived anywhere since childhood. The house was meant to be my refuge, a place where I could plant perennials and know I’d see them flower year after year, an investment for my daughter and me after many years of renting.
The sellers had trashed the house before leaving for Colorado, and perhaps I should have walked away when I discovered the devastation. Instead, friends helped me clear away rotten food and broken furniture and repair gouged walls. I rescued a dog. I made improvements: bolting and bracing the foundation, removing one tree and planting others, installing a security system and attic insulation.
To help pay for the work, I refinanced in 2007 at $511,000 with a five-year fixed-interest first lien and a variable-rate equity loan. With the real estate market continuing to rise, a Wells Fargo Bank loan officer assured me, it would be easy to refinance to a fixed-rate loan before my rate went up in 2012.
With little money for extras after fixing the foundation, I scaled back to projects I could do myself: painting and planting. I tore out the frontyard grass and filled the garden with roses, irises, bougainvillea, jasmine, trumpet vines, gardenias, callas and cannas, hibiscus. Springs were glorious.
By mid-2008, some neighbors on my short hillside street had started defaulting on their loans. One eventually negotiated a short sale; two others went into foreclosure. Worried, I called Wells Fargo in March 2009 to see about refinancing in advance of my adjustable-rate mortgage payments rising significantly. The house was already underwater, the banker told me. My equity was gone, so there was no way I could refinance. He suggested that I wait it out and hope things improved before the rate rise in 2012.
By October 2009, it was clear that the real estate market was only getting worse. I sent Wells Fargo my first application for a mortgage modification, beginning a months-long slog through dead-end phone calls, faxes, lost documents and conflicting information from the bank. Over a period of five months, Wells Fargo denied three mortgage modification applications. The last denial was based on a bank error suggesting that I had a spending deficit of more than $1,600 a month, despite my having exemplary credit. When I wrote a detailed explanation, the banker with whom I next spoke said, unapologetically, “We read numbers, not words.”
In November 2009, the Los Angeles County assessor’s office informed me that the assessed valuation of my home had dropped $129,060 since the 2006-07 tax year. As I grew more anxious about money, my health declined. Problems that had been in abeyance for more than 20 years returned, and my medical bills began to climb as a result.
In January 2010, one of the telephone bankers at Wells Fargo suggested a short sale. It felt like a gut blow. Sell my home? My refuge? My garden full of flowers and fruit trees?
In February, Zillow.com said the house on which I owed $511,000 was worth $381,500. A comparable house a block away sold for $260,000. I clearly needed a bailout. I made my last desperate bid for help from the bank, offering to pay the full mortgage at a lower interest rate if only I could keep my home. I also wrote to regulatory agencies and to my elected federal, state and local politicians to ask for ideas. Some responded; most didn’t; none could offer an idea I hadn’t tried.
In April, I consulted a credit counselor; he said that I was doing all the right things and that my credit score was “fabulous.” His only suggestion was the one I’d already rejected: Consider a short sale.
In May, a senior vice president at Wells Fargo Home Mortgage suggested a short sale.
On June 1, 2010, I acknowledged defeat. I declined to make my mortgage payment and two weeks later hired a short-sale expert and listed the house.
That decision brought no relief. Instead, I endured months of daily dunning phone calls from Wells Fargo, which then rejected an offer from a buyer. The bank set a date for a foreclosure sale, then postponed it. Finally, in April, it agreed to an offer of $325,000 for the house. The sale closed less than 48 hours before the bank’s scheduled foreclosure sale.
By that time I’d moved. My rental house is three times as far from work as the old one and about half its size. The new neighborhood is quieter and less friendly, but the air is cleaner. Gardening, once a joy, is a chore I’d rather skip. Once in a while I return to Highland Park, but I cannot drive past my house. I fear the changes I might see.
A couple of months before moving, I applied for a small credit union loan, just to see if I could get one. I could not. My credit, once exemplary, is shot. My lack of financial security is disconcerting, and I expect it will dog me for years.
I can’t find a life’s lesson here; no insight into why this has happened to so many people. The banks could help us, but they don’t.
I will recover, but it’s unlikely I will ever own another house.
Kathy Gosnell Seiler is a copy editor at The Times.
Postcards from the recession is an Op-Ed series of on-the-ground reports from throughout Southern California on how the economic downturn has hit individual neighborhoods.