I WAS SUED OVER MY HOME BEING FORECLOSED

Wasn't the year 2005 unbelievable for selling real estate? I was a Realtor at that time and made $135,000 for the year. 2006 my income dropped to $85,000. By 2007, I was still working as a full time Realtor. My income in 2007, before taxes and expenses, was only $5,000!!! And my entire life changed!!!

Before the "boom", my husband and I had purchased a home in 2003, in a very nice middle class neighborhood. The home had been owned since the early 70's, when it was newly built, by one owner and needed updating. It was 1600 sq feet, in excellent condition, had a gorgeous yard with mature trees and only $114,000. We loved our home and intended to slowly update it, not realizing the fact that we had a "find" and should do everything in our power to pay it off. As I started to make more money, we made the decision to sell our "find" and upgrade to a brand new home, priced at $100,000 more! Being in a hurry to move forward, we did nothing to update our home, sold it at $165,000, just before the height of the market. What I forgot to tell you was that, we had taken out a $34,000 second mortgage and promptly spent every penny of it (I cannot even remember where we spent it). After paying the selling agents commission and back both mortgages and splitting closing costs, we ended up walking away with a little over $1,000!!! Knowing I had several closings in just a couple of months, we did not seem to worry and moved ahead with buying the most expensive home we had ever owned. It might not seem expensive to some, but to my husband and I, who had lived on grocery store incomes and owned seven previous homes, a brand new 1800 sq ft home for $212,000 was more than we had ever had. We lived with my husbands uncle for 60 days while the home was finished. When it came to financing, we made all the big mistakes! We financed closing costs and loan fees into the loan, which was a "dreaded" interest only, adjustable rate loan with a two year pre-payment penalty. We walked in to the Escrow office with nothing more than our driver's licenses and a pen. We didn't put one penny down and to make matters worse, we didn't just have one adjustable rate loan, but two. We took out what is called an 80/20 loan. One loan for 20%, that acted as the down payment and 80% for the balance. This way we avoided Mortgage Insurance. Our initial house payment was $1560. Not bad, considering our income at the time. My husband's income stayed around $40,000 a year, while I went from working part-time at the grocery store making around $15,000 to over $135,000 in 2005. I had worked as a part-time checker since 1991, making about the same every year. When we saw this enormous income, we started spending and did not stop until it was gone! First buying the house, with no down payment and a high interest, adjustable rate mortgage. Secondly, not holding out any taxes from my income. Third, leasing an expensive car and lastly, not saving a penny for taxes or any other expenses, but immediately making cash improvements to our brand new home. $4,000 for stainless appliances and front load washer and dryer with pedestals, $1,600 for window coverings, $6,000 for a vinyl fence, $1,200 for upgraded carpet, $3,500 for front and back landscaping and backyard sprinklers, etc., etc. With the added income, we paid off our older Subaru Outback and paid off our credit cards. These were the only two smart choices we made in the middle of spending every dime before the paycheck was ever deposited in the bank! We were "living large" as the saying goes. When we needed more money, we took out a third mortgage. Our house payment was now $1,800. Still manageable with our income. We were coming close to having lived in our home for two years, never having made a late house payment. Life was good, or so we thought. January of 2007, our neighbors sold their home with a profit of $80,000. We decided we would place our home on the market as we wanted to buy property to keep our horses on. We had three horses that we were boarding. We made the decision to sell, but had to wait until June, as that is when our pre-payment penalty would no longer be in place. By June, everything had changed. It was around this time that someone in my real estate office told me about some loans not being able to be sold by the loan originators and causing some issues on the stock market. I really didn't understand what all that meant at that time, but soon I knew all too well.......With our pre-payment penalty gone, we were in a position to sell, or at least we thought we were. I listed the house, but after viewing the comparable recent sales, I found we would not be getting quite the profit our neighbor did. In fact, we would be lucky to break even. We had already signed contingent papers on another property and had to sell our home or loose our earnest money. We touched up the painting on the interior and had the carpets cleaned (which cost $300), listed the home, put up the sign and waited. And waited and waited. My income began to drop drastically. My listings were not selling and the buyers seemed to drop off the face of the earth. It all changed so quickly. We started selling items to pay our $1,800 a month house payment. We sold our paid for Subaru Outback and were able to pay two house payments. In the mean time, we lowered the sale price of the home, forfeited our earnest money on our other property and started selling our beloved horses. It was so hard to go from being comfortable to doing really well to losing everything. The only comfort (and sadness) that I had was that we were not alone. Everywhere, people were losing their homes, followed by jobs or income. I had read where some people in California were living in a parking lot, out of their cars and in tents. Whole families had lost everything. In July, we received a notice that our house payment was going to go up to $2,500! Good ol' adjustable rate mortgage! We couldn't refinance, we now had bad credit from the late house payments and my income had dropped about 95%. Our payments were behind by three months, when we made the decision to do what we felt was the "right thing", we moved out. We felt it was not right to stay in the home as we were not able to pay the payments. The only thing we took was our washer/dryer, refrigerator, microwave and dishwasher. We moved from our home and rented (for the first time in our lives, not that there is anything wrong with renting) a home from a friend. We exchanged his appliances, which were the same age as ours, but were just the standard appliances that construction companies place in entry level subdivisions. Doing "the right thing", we continued to market the home to sell it for what we owed on it. I was able to get my old job back at the grocery store, which kept us from being homeless and I still made an attempt at selling real estate. A friend of ours had relocated to our town, loved the house and agreed to purchase the house on a short sale. Our troubles were over, or so we thought!!! The second mortgage refused the offer of $10,000 on the $42,000 note. They blocked our sale and our friend was forced to find another good deal, which worked out for him. But we now had no way out of this mess. We contacted out attorney, he told us there was nothing we could do, other than continue to market it and try to sell it for what was owed or let the bank repossess it. We voluntarily gave it back to the bank.

Six months later, after listing a couple of homes, I "googled" my name to view the listings I had just posted on the Internet. In searching for my listings, I found my husband's and my name posted next to a description of a court proceeding in which we had been named in a judgement granted to our second mortgage holder! I was horrified! Our second mortgage had filed a judgement against us!!! First, they had refused to accept our short sale offer, forcing us into foreclosure and now they had filed a judgement, forcing us into bankruptcy!!! I called them and tried to reason with them. They told me that we now owed $50,000, rather than $42,000. They told me that we now owed for their court costs in addition to the initial balance. I told them we were broke and asked how did they think we were going to pay this. They (very rudely) asked me "you and your husband are employed aren't you?" I answered "yes." Then the representative on the phone told me "well, there's income there and we will garnish your wages." I think I cried after hanging up. Then I called my attorney. We started bankruptcy (Chapter 7 proceedings).

Within a month of moving out of our home, I watched from the upstairs window of our rented house, as the last of our things was taken. The repossession company called me and made arrangements to pick up my 2005 Volkswagen Jetta that I had been leasing. I think this was the hardest on me. Worse than the house or even the bankruptcy proceedings (including the embarrassment of knowing the trustee, who shopped at the grocery store I worked at). I called the company and let them know what time worked for them to pick the car up. Cleaned all my belongings out of the car and pulled it onto the street, for easy access for the tow truck. I left the key in the ignition and the doors unlocked. I climbed the stairs, stood in the upstairs window and watched as the repo man jacked the front of the car up and pulled it away. I stood in that window and had a good cry. It was the last of my possessions from my 'glorious' career as a Realtor. I know we had so much to be thankful for, at least I know that now. But going through this was my teacher. I know many of you didn't have a rental home or a job to go to. Many were homeless and in some cases jobless with no where to go.

Then the inevitable happened. We had almost finished our process to file Chapter 7, when it happened! My husbands paycheck was short $175! The mortgage company that had refused our short sale offer had garnished his paycheck, as they said they would. He was paid weekly and he would be losing $175 from his $480 paycheck (after taxes) every single week. We were already in trouble financially and now this! All I could say was "why us?" I found out later I was not alone. The rest of the country was in the same mess. But it felt like we were a target!

My father in law had purchased a town home in California in 2005, paid three times more than he should have. Like the majority of America, he was "upside down" in what he owed vs. the value, as the value had plummeted by 2008. His mortgage company was very congenial and forgave him $280,000, as well as re-negotiated his interest rate to 1%!! Then there were others that stayed in their homes for two years or more without paying a house payment and experienced no consequences.

After looking back on this entire housing crisis mess, I have decided that there was no "right way" to handle this. Since we were twenty four years old, my husband and I had owned homes and never rented. From the time we had purchased our first home, over the next twenty five years, we had owned eight homes. But did we really own them? All had been purchased with zero down on a thirty year mortgage. Now that we have experienced this, we are poorer, but wiser. We now rent. First we rented a home, now with our children grown, an apartment. I tend to agree with Dave Ramsey(a budget advisor) now. He advises everyone to pay off all their debt, to have at least $1,000 as an emergency fund and eventually a six months supply of expenses saved. But most importantly, save at least thirty percent down to purchase your home. When you purchase, only finance for a maximum of fifteen years.

Through all this, we also re-adjusted our tendency to eat out. We found we were eating out and sometimes spending as much as $400 a month. We now try to shop using the store ads and are cooking at home. The savings is incredible!! Maybe one day, if time permits, we might start using coupons. While working in the grocery store, I saw many shoppers get items free and sometimes after sending in a rebate, the manufacturer actually paid them to purchase their products. I know we are not alone and many of you have gone through the same ordeals, if not worse. The important thing is that we (all of us) learn from them. Learn how to live within our means, live on a budget, actually put money into savings! Then when you do experience a bonus in your income, you won't blow through it like I did. I think they call that "tightening your belt". I have found the most important aspect of not spending on items not "needed", is thankfulness. The car I used to dislike to drive, became my only car and I found myself thankful that it ran. I started looking at things differently. I was thankful for reliable transportation, rather than upset because my car was not a newer model. When I started being thankful, I stopped wanting what I didn't have. Sure I didn't want to settle for my station in life and wanted to better myself and have nicer things, but I changed my attitude toward those nicer things. I stopped charging them on credit cards and financing them using other people's money. I saved for them, then it was a little different when I went to purchase an item, I wasn't so quick to spend the money that I had worked hard to earn on items I didn't really need.

Please feel free to share your stories and share what you have done to get by and actually change your future financial outcome through "tightening your belt". And most of all, remember, it's only temporary. You will recover! The most important issue is that you learn from it while your there and change bad habits.