A free-lance writer and commentator by the name of Kevin Mims did a piece on the American Public Media financial radio show "Marketplace" today. In it, he provided his own personal "subprime crisis" story. The entire transcript and streaming audio can be found on the Marketplace site, but here are the relevant excerpts:
..four years ago we bought an 80-year-old home in a nice Sacramento neighborhood. My wife, an escrow officer, and I, a notary public, were earning good money. We had every intention of staying here forever, but the subprime lending crisis has triggered another real estate meltdown. Now my wife's salary has been cut and her bonuses eliminated. My notary work has dwindled to a trickle. It becomes more difficult to make our house payment each month.
Financially it doesn't make sense to even try. We owe about $430,000 on the house. It's currently worth no more than $400,000. Selling isn't an option. Sooner or later we will probably give up another home to foreclosure. The interest rate is competitive, six and an eighth, and it's fixed until August of 2012. A sudden upward adjustment of our loan won't force us out. It's the sudden decrease in our incomes.
Of course, this isn't the whole story. Agent Bubble was kind enough to fill in the blanks in the Mims' timeline:
June 2004: Original purchase for $350,000 ($315,000 first from Saxon, $35,000 down)
February 2006: $100,000 cash out from JP Morgan
June 2007: Refi into a $360,000 first and $67,500 second from NL Inc
For some reason, Mims forgot to mention that $100K in cash he took out two years ago in his tale of woe. The last part of his commentary really goes for the jugular:
On the bright side, my stepdaughters are grown up. We won't have to uproot them. The only downside for them is, they may end up housing us for awhile.This guy blew $100,000 in two years and now he want to move in with his kids? And sympathy from the Marketplace audience? Is he joking?!
I wonder what he spent the money on?
Agent Bubble had this to add:
One thing on your post...The following line:
($315,000 first from Saxon, $35,000 down)
I'm not 100% certain they put the $35K down. The tax records don't go far enough back to see. I can only assume that since it happens to be 10% of the purchase price.