Looks like the golden parachute failed to open for my neighbor.
Saw Price the other day. The appraisal for his 4,200+ square foot house came in much, much lower than expected: $310,000. He is now officially upside-down on his mortgage, which had ballooned from $165,000 to $375,000 over the past few years due to multiple refinancings (and cruises and dinners and concerts).
For several months now he had held out hope that the bank was going to bail him out -- give him a low fixed-interest rate of 6%, reduce his principal, and ensure that he and his family could stay in the house regardless of their past fiscally irresponsible decisions. He was advised that he could only do this if he was behind on his mortgage. So he stopped paying his mortgage several months ago.
Well, turns out he CAN stay in the house. If he comes up with the difference in equity: $65,000.
He shared that they've been looking at other homes in the area to rent. That his wife is adamantly opposed to leaving the house. That some tough decisions will need to be made in the next couple of months.
Price is still holding out hope that the Obama administration will use the TARP funds to buy everyone's toxic mortgage, including his own, enabling everyone to stay in their homes. It's a long shot... but mentally, I know he's already preparing for the worst.
"Renting is the best option right now," he said. "Let someone else take care of the home repairs. I'm going to focus on growing my business. In fact," he smiled broadly, "I just got a huge contract in the next county. Just the irrigation alone is paying $75,000. The whole project is worth $375,000."
I didn't ask the obvious question -- if your business is doing so well, why aren't you paying your mortgage?
But talk is cheap and next week may bring a different reason to crow or lament. So I told him to hang in there, keep his eyes open, and perhaps an opportunity will come his way.
Because a part of me is genuinely sad to see a family in this predicament. Despite the endless bragging and flaunting of borrowed money, I know that the dream is turning to dust. And squeezing so many children in a smaller home will certainly have an impact on their psyche.
