I am writing my story in response for Richard Zombeck’s ShameTheBanks.org website and his efforts in lobbying for homeowner modification support from the US Congress.  The fact that my upper middle income level single family home has depreciated a half a million dollars is deplorable.  Plus I believe my builder Del Webb was fraudulent in their loan process.  I purchased our home from Del Webb in North Las Vegas, Nv for $895,000 in October 2005 and its Zillow.com estimated value is $390,000 today (Apr 2010).  My other concern is that neither the democrats nor republicans have identified the primary cause of the housing bubble.  AND, it appears there is no legislation on the table to prevent a reoccurrence for our future generations.

A few days ago (April 2010), I received notification that my Aurora Loan Services mortgage modification had been completed under Obama’s Home Affordable Modification Program (HAMP) using a 31% debt to income ratio.  In short, my 6% five year adjustable “interest only” $712,000 first mortgage principal and interest (PI) payment of $4275 per month has been adjusted to a 25.5 year hybrid first mortgage of five years fixed 4.125% with a PI payment of $3868 and remaining years at 5% fixed with a PI payment of $4176.  My loan has been approximately $20,000 in arrears for the past two years.  During the past 20 months I made steady payments including the original scheduled payments until Oct 2009.  In early Nov 2009, I applied for the HAMP with my mortgage company and started the “three month” modification program proposed payments at that time.  I was told by Aurora Loan Services to continue the modification payments as the deal continued to be worked.  I signed notarized papers 15 March 2010 and realized this was the “real deal” and a workable solution for our home.  While I was successful and it was completed in a relatively short period of time (5-6 months), it was still a confusing and redundant paperwork process.   Three different paperwork packages had been sent to me initially, and during the process, I had to follow-up with additional stacks of paperwork.   Being proactive with “tenacity” and numerous phone call follow-ups was definitely a key.

I believe I am one of the few “lucky” homeowners to have their loan modified because my income has actually gone up significantly since my purchase, my job is secure and I am in a Chapter 13 Bankruptcy proceeding.

The “rest of the story” is how I got into this predicament.  In the spring of 2005, I put $20,000 down with Del Webb as we wanted to upgrade to a new house on a golf course in a guard gated community.  During the three previous years we saw our old house appreciate in value and we wanted to “cash out” on that property on the upgrade.  As our new house neared completion, we attempted to sell our old house so that we could invest what we thought would be at least $200,000 equity into the new house.  The old house did not sell, but Del Web proceeded to “qualify” us for a first and house second mortgage on the new house with only 5% down.  A few weeks prior to mortgage closing we told Del Webb we did not want to close on the new house until the old house sold.  Del Webb representatives threatened us with a law suit of $100,000 to pay for “upgrades” as well as keeping our $20,000 deposit.  With all that pressure, I decided to close on the new house and ended up leasing the old house with a huge negative cash flow while still trying to sell it.  About two years later we did sell the old house, but never realized the $200,000 equity (housing bubble) and the negative cash flow created our financial disaster.  I should have stood my ground with Del Webb and let them try to sue me.  They were incredibly fraudulent in how they qualified me for a loan I couldn’t possibly afford, and then they threatened me with a huge lawsuit if I didn’t take their fraud loan.

Politicians have been irresponsible in that they blame each other for the cause of the housing bubble and they are pulling strings with no clue on real solutions.  Amazingly to me, the reason for the housing bubble and the solution to prevent more catastrophes in the future is easy to understand and solve, ‘er unless you are a politician.  To me, the obvious reason this happened is that “comp” (comparable) value estimations got completely out of control, cheap money from the fed allowed horrendous “housing-only” inflation, and lenders were allowed to make loans to people that wouldn’t otherwise qualify using a 31% debt to income ratio.  The end result is that thousands upon thousands of good credit no money down investor loans were made by our ridiculous financial institutions while “flippers” were making humongous returns and tying up real estate while “real” homebuyers were forced to buy highly overpriced homes “if” they were lucky enough to “win” a lottery to even buy a home (whew…).

LONG TERM POLITICAL SOLUTION.  So the easy political solutions are also simple in that “comps” need to be evaluated differently!  They must consider land value, building material cost, and labor cost and never, ever use a neighbors recently “sold for” comp value ever again.  Also, lenders must use a government approved debt to income ratio for originated mortgages and if they refuse, the lender should be “taxed” to death for profiteering.

SHORT TERM POLITICAL SOLUTION.  Housing values need to be re-inflated to get America moving again.  Obviously jobs are one key to that.  But, much more needs to be done!  We need to embrace some inflation, especially for housing values.  But the country needs to ensure wages rise accordingly.  Buyer housing credits were effective in temporarily creating a few jobs in the housing industry but did not help inflate existing housing values what-so-ever.   We need tax credits for taxpayers that pay down existing mortgages.  A once or twice in a lifetime tax credit for all Americans would really help increase property values.  I’d propose that for each dollar paid for principal above the original mortgage be granted as a once in a lifetime tax deduction using a dollar for dollar tax credit up to $10,000.  Therefore a wage earner today could take immediate advantage while those that are unemployed or not a present homeowner could still get that advantage in the future.  The biggest advantage is that this would be fair to ALL Americans that now or in the future pay federal taxes and it would have an immediate effect!!!!

I am also hopeful there will be other programs to get the “American Dream” back on track.  For all the hard luck homeowners that have posted stories and do not meet the 31% debt to income ratio...  If you lost your job or for some other reason you not have the required income, I recommend you stop throwing good money after bad; accept your fate and leave your house.  Yes, you will have that bad credit record for seven years.  So start that time clock now and do not wait another year or longer.  Obama's programs are not welfare, but they are programs for existing homeowners with "affordable" income levels but now have extremely bad credit due the the housing bubble and various economic conditions.  It should be obvious if you qualify.  For those who do qualify but are in refi paperwork hell, good luck to you and your family!