The House Saga

I'm back into a blog habit, but I'm coming back with a bit of wordiness, so if you're busy, skip this. Seriously, it's long.

I want to give an update on our house saga. To do that, let's give you the background: a little over four years ago, we lived in an apartment. We were in Mid-America Seminary Student Housing. We had moved there in 2002, and had been in housing for 4 years. I had been in and out of school due to finances and some other frustrations over those years, but the vacancy ratio in housing encouraged the school to just let us stay put.

However, MABTS was relocating and building new housing in the process. For the first time, student housing would be within walking distance of the school, and this was (and is) a great thing! The school, though, sold the existing apartment complex. The low rent was going to go to a market-value rent. Which was going to be about $900, according to the management that said "they still weren't sure." So, with Ann pregnant, me working two jobs, we went house hunting.

At the time, she had a job she liked, I had a job I loathed, and I had the opportunity to preach. I was hopeful to get back to school somehow, and we expected we'd be in the Memphis area for several more years. So, we bought a foreclosed upon house in Horn Lake, Mississippi. We had one picked out, but while Ann was having Steven, someone else bought it. We found a different one that was an almost identical floor plan, but actually in better shape, and the same price.

So, since the payments were going to be less than the $900/month rent, Horn Lake schools weren't bad, and Mississippi homeschool regulations were something we could deal with, we bought the house. Closed on it, September 15, 2006. We now had a first mortgage for 80% of the house price, a second for 20% of the house price, and an additional cash loan we took out for supplies to fix up, clean up, and make the house home. Steven was 36 days old, and for the next two weeks his mommy and daddy were obsessed with cleaning, painting, flooring, and moving. By September 30, we were in the house. Angie's third birthday got celebrated in there somewhere, with a seriously stressed family.

We painted. We put in laminate floors in one room. We planted trees that spring, filled in the giant divot in the backyard where previous owners had left a blow-up pool for too long. We priced fencing and didn't do it, though we planned to.

Yet life changes. Within two years, actually 22 months, we moved from the house to Monticello, Arkansas, where we rented a house. This came from a necessary job change, which is a whole different blog post. We were unable to sell the house, but instead rented it to some friends who hoped to get their credit improved enough to buy it. Since they were going to buy it, we told them to paint and treat the house as their own.

We set the rent at just enough to cover our expenses, and told them that if those expenses (mortgage, 2nd mortgage, insurance and taxes) went up, we'd have to raise the rent. We all expected that it would take about 12 months for them to buy it.

Then the housing and credit markets went, well, splat. That would be the highly technical term for it---splat. Like so many eggs dropped off the roof. They weren't able to buy in 12 months. The insurance and taxes doubled on the house, retroactive to the first day it was a rental, so the escrow account went negative, and our house payment went up by $200. So, we raised the rent. We tried to sell the house, but with renters in it, it wouldn't sell. Plus, we were trying to get enough to pay it off and the loan we had taken to improve it.

No good.

Another year later, and the house payment went up again, because the taxes and insurance went up, again. Apparently, even though housing values were plummeting for normal people, the government was valuing the house higher and the "replacement cost" of the house was going up---the insurance for the house valued it at $60,000 more than we paid for it. Apparently, unemployed construction workers are expensive to employ.

So, rent went up again. Renters, recognizing that they were in a bad spot, moved out. See, the credit market issue had them on a treadmill: one application, they were denied because they needed a credit score of 650. Six months later, they had a 650 and needed a 680. Then it was 720. As it was, they were not going to get there, and they didn't want to keep paying rent on the house---at the rent we had reached, they could rent an apartment with some amenities, like pools and playgrounds.

We were then faced with putting the house on the market. And with not having any income to help cover the house payment. So, we went into scrimp and save mode, but the job change that put us in Almyra, Arkansas, as good as it was, did not put us where we had a spare $1000 a month in income. Who does? However, a very gracious church family helped us with the first month, there were some other circumstances that got us through the second, but the house was still not even being looked at.

I couldn't get it rented for enough to pay the payments, much less provide for the need to maintain it for renters.

So, I called the mortgage company and asked what my options were. The first mortgage described a process that sounded as fun as a dental drilling that would enable us to sell it for less than we owed, called a short sale. I told them we'd think about it and talk to the second mortgage company.

The second mortgage short sale process sounded like having a tooth extracted without anesthesia and through your ear. So, Ann and I just didn't want to do it. Then a very generous person offered to no-interest loan us the money to make house payments while we tried to sell the house. So, we thought we'd cut the price on the house to just enough to pay what we owe and then figure out how to pay closing costs beyond that.

Meanwhile, the church family had graciously helped us paint the house inside and out, it looks great. Well, except one interior wall that I just couldn't get straight, and the floors have never looked good. Even the one I had put laminate down, well, I know how to do laminate better now---but that was rough.

That was December. On my birthday, I get a call from the realtor that "I think I'm going to sell this house today!" Naturally, this was almost the best news I could have gotten. Until she told me the price the house was being advertised at: $25,000 too low to pay it off. I asked why, and was told that the first mortgage company had told her to lower it for short sale purposes.

Except we never really approved of having it short-saled. In fact, since the house payments were covered, we kind of hoped to sell it full price. And I knew that the second mortgage company was going to be a beast to deal with on short-sale paperwork.

However, once a house has had its listing price cut down, the truth is that it's not going to sell for $25,000 higher. Not when that's a 20% increase. So, reluctantly, we started doing the paperwork.

To say it was a frustration would be an understatement. We filled out pages upon pages, cried and yelled, and proceeded. The whole situation felt hopeless. More than once, I came within 1 digit on the phone of just calling the mortgage company and telling them to foreclose it and be done.

Finally, after an excruciating 2 months of paperwork, we had the approvals. We used up the balance of our income tax refund to fund what little we could to make second mortgage company happy enough to refinance what we owed them, and were able to close on the house last week.

The final toll was that the first mortgage company "wrote off" the balance we still owed after closing. They held our most recent mortgage payment because they wouldn't approve a short-sale unless we were delinquent. They never told us this, we were never delinquent, but they forced us into delinquency. The goal being to make sure our credit was punished, because after the write-off, counting the fees they charged us for that one 'late' payment, interest, points paid at closing, they have only profited $16,000 in four years. Plus the tax credit under TARP/HAMP/Fannie/Freddie whatever, which was about $2000.

The second mortgage wrote off nothing, but instead modified our loan so that we can keep paying them off. Fortunately, the interest rate is better than I expected, and a lot better than cash advancing a credit card to pay it off.

The long-term implications on this? I don't know. I have no idea if we'll be able to buy a house in the next 7 years. I don't even know if I'll be able to get a car loan soon.

I do know what we've seen: mortgage companies have bizarre rules and will strangely help someone 3 months late but not someone that calls and says "I'm not late yet, but I'm out of options." That real estate is a mess and that needing taxpayer bailouts may have forced mortgage companies to be more helpful but they're certainly not friendly, nice, or compassionate. Our real estate agent went above and beyond even as what she was getting 3% of kept shrinking, so that was a positive.

We've seen how gracious our church family is, and how good God is to provide. We tried very hard to ask people to pray and also make clear we weren't asking them to pay. Folks were still more helpful than would be considered reasonable. We are truly indebted beyond what we can pay back, even after we repay the payment help. There has been such evidence of grace and help, just with the prayers and encouragement around here, that we knew we weren't alone in this. We had some dark moments from it. Not every joke about burning the place down was really a joke.

It's over now. We're very grateful that we live in a house owned by the church---while it keeps us from having a long-term equity plan, it's exactly what we need. We now have some clarity of where we sit financially, and while it's not Dave Ramsey-approved, it's progress.

We stopped by the house after closing on it. Ann hadn't seen it since the church men had helped me paint the outside. It was an emotional moment---we sat there and wept a little for the dreams that died when we left that house, and wept a little more for the love that had gone into making it as beautiful as it is now. Hopefully the new owners will enjoy the house.

Us? We got to come home and be with the people that love us enough that they helped us when they didn't have to. And we get to love them back and look forward to as many years together as they can stand.

Doug