Why you need an Emergency Fund...

[disneysteve]

Another problem with IO and ARM is that the lenders started approving people if they could afford the initial payment even if they couldn't afford the later payments after the principal was due or the rate adjusted. People just assumed they could sell or refi before that happened.

[ThriftoRama]

My only guess is that $70k a year doesn't go very far in California, especially if you have kids? Just a thought.

[tbc32]

These kind of articles are great because we can learn from them and not make the same mistakes.

[Seeker]

Originally Posted by MonkeyMama

Certainly a good reminder...

of course, um, this is California, but I have no idea why you would buy a house like that on that income. ???????? Oh my. I mean obviously she could have found something more modest/affordable. Look at that house!

I know plenty of people making those kind of payments with no other choice. But she clearly lives in a more affordable part of the state. Those are some pretty nice digs. (I mean our relatives have $3k mortgage payments for condos, and due to the lack of affordable rents. That is very different from her story).

Just looks like another subprime mortgage mess to me. $2500 month? interest-only? Yikes!! This is the problem here. I am not sure how far an emergency fund would have stretched in this case.

There is no justifying that house payment on that income. Particularly not on an interest-only payment.

I wouldn't assume she bought that house with 2 incomes. It looks like the same-old, same-old. Of course, if she did, then when was it going to occur to her that she can no longer afford it?

She would not have been accepted for that mortgage payment on her income alone. Just not possible. Her husband's income was included in the purchase of this house.

Altadena, CA is not a "rich" community and there are very very few places where you can get a 3 bedroom house with less than a 600k mortgage. She's in LA County, not Orange County... or any of the costal communities which are much more expensive. Look at the cars on the street in that video -- the cargo van and the other are both older models.

Foreclosures are the worst in this state now out of all the states. Layoffs are also becoming more and more common as the economy slows.

Yes, I do not disagree that an interest only mortgage is NEVER a good idea -- it's never something that any financial cognizant person should agree to.

But we do not know their situation.... when they bought the house could have also impacted this decision. If they were expecting the cost to go up (instead of down), then they probably planned to refinance when the higher worth of the house would mean a lower costs.

Yes, her house and this family is part of this housing crisis we have now. And yes, they should have had a lot of money saved for just such a situation.

There's also no denying that she can sell some stuff, jewelry and maybe even get the little puppy sold or under someone elses care for awhile.

You all are going to be hearing a lot more stories like this, especially with Californian's. There are some pretty confusing things going on right now, and people don't seem to be changing many habits here.

[m3racer]

Ugh! There are too many Americans that are in her situation. This includes my parents, who can't afford their mortgage and are in debt to their necks.

[Seeker]

Originally Posted by simpleyme

the lady in this interview came off as a really nice gal

I find it interesting that she knew to take off her expensive items before collecting food at the food pantry , but did not seem to consider selling her items ,
also I did not get that her mom moved in with her and rented out moms house and now it is her(the daughters )income? either this lady owns 2 homes or a better choice would have been to try to unload daughters house and move in with mom

Yeah, Mom rented out her home and Mom is living with daughter and giving her the money from the rental.

Mom is living there and paying rental money in exchange for her one room? Looks like it; while Mom appears to spend more than get, she does gain a closer relationship with her grandchildren while the father is MIA. And Mom gains satisfaction in knowing that she is helping in her daughters time of need.

Assuming Mom's house was large enough, then that probably would have been a good option. I guess it also menas that the children's lives and home might be disrupted again and maybe even means different schooling districts.

But sooner or later this is probably only get worse.

I somewhat hope that hubby returns with a newfound job that can help support this rather dismal situation. But I also am hating the guy in this picture, that leaves the wife/mother and children when things get bad.

This lady definitely needs to get another job, ASAP. And Mom living there helps make that possible too.


---

Also I have no issues with the OP and the comments therein. I just put in my two cents because it seems that the story was completely ignoring the husband side and you were looking at this situation that she had been alone all this time with this major expense that she could NOT have handled alone with 70k of income.

The husband should be paying child support if there was that length of time involved. This would have been a dismal picture as soon as he left (even if she was making 70k).

Yes 70k in California does not go very far. Not for anyone purchasing a house say in the last 10 years.

[Brokemofo]

Originally Posted by tripods68

This is what's wrong when couples buy "above" than what they can't afford. They are in so much in debt, its hard to save. She can't stay in the house for long especially when the unemployment check runs out.

You are correct that couples shouldn't buy "above" what they can afford. However, you don't know that this was the case. You have no idea how much the Husband that left made, and he lost his job too before he bailed on her. If he made $70 k as well and they didn't have a bunch of other bills, maybe that was not too much house. I/O maybe not the right mortgage though.

[Brokemofo]

BTW, there are certainly times when an interest only loan or line makes perfect sense. Maybe not for the aforementioned couple, but many people do I/O loans for various reasons and it makes perfect cents.

[LuxLiving]

I hate this for this family...


Some ideas?? (others may have mentioned these, I've not had time to go thru all the thread.)

1)Garage sale, ebay, consignment stores, Craigslist. Goodbye Tiffancy bracelet & Coach bag!
2) Time for two or three jobs. Doesn't matter where, doing what, she needs to take them. Especially while Granny is there to help.
3)Bankruptcy which in some states stops foreclosure proceedings for a certain amount of time giving her time to regroup.
4)District Attorney's office to go after husband for child support.
5)Short Sale or Deed in Lieu of Foreclosure.
6)Once she either saves her equity or has to walk away, get much lower rent apartment/house there or make a move to a lower cost of living area until she can regroup and get back on her feet.
7)Sale of cars, furniture, etc., that will net some cash to get some wiggle room.

[Troyrb]

I have to say I make well over what she did and there is no way I would ever get a mortgage even close to that much. That is just crazy! I know in these areas starter house go for 300k or more and that is the whole problem with our countries current financial mess. The average wage in these areas hasn't changed much but the cost of house have tripled or more in the last ten years. Something has to give and I think that is what we are seeing now.

[disneysteve]

Originally Posted by Brokemofo

You are correct that couples shouldn't buy "above" what they can afford. However, you don't know that this was the case. You have no idea how much the Husband that left made

That's true, but regardless of how much they made jointly, they still apparently had little to no savings which might lead me to believe that they were strapped by their mortgage payment (although not too strapped to afford Coach handbags and Tiffany bracelets). So maybe the mortgage was too big or maybe they just didn't have control of their overall spending. The article doesn't say one way or the other.

[loulou]

Yikes. Does it make me a cold person that I don't feel an ounce of compassion for the majority of the 'sob stories' CNN highlights?

[Brokemofo]

Originally Posted by loulou

Yikes. Does it make me a cold person that I don't feel an ounce of compassion for the majority of the 'sob stories' CNN highlights?

Maybe. But, I'd be more interested in knowing your feelings twoard the ones you don't pity.

[disneysteve]

Originally Posted by loulou

Yikes. Does it make me a cold person that I don't feel an ounce of compassion for the majority of the 'sob stories' CNN highlights?

Nope. I have little sympathy for people who are struggling by their own hand. If you are maxed out in debt due to some catastrophe, medical issue, natural disaster, etc., that's one thing. If, however, you are facing foreclosure because you bought a house you couldn't possibly afford and choose to live beyond your means, that's your problem.

[Joan.of.the.Arch]

Well, just to wildly speculate, let's just say that they had a couple million dollars in an emergency fund and the husband left with that. Or, shall we say he left because she insists on buying new bracelets and purses every week and that he has gone to set up house elsewhere and is coming to rescue the kids as soon as he finds work? We don't know the details. We don't even know the big picture, really.

[Brokemofo]

Originally Posted by Joan.of.the.Arch

Well, just to wildly speculate, let's just say that they had a couple million dollars in an emergency fund and the husband left with that. Or, shall we say he left because she insists on buying new bracelets and purses every week and that he has gone to set up house elsewhere and is coming to rescue the kids as soon as he finds work? We don't know the details. We don't even know the big picture, really.

Now that makes sense.

[kork13]

I'd say the most 'reasonable' explanation for why it all happened this way is that maybe the husband made significantly more than she did, like $100k+... That might have allowed them to afford everything better, and thus when he lost his job and left, they were out of luck. Admittedly, the lack of any substantial savings is still a terrific idea... Just to throw caution to the wind and give them a benefit of the doubt...

[LuckyJB]

Have an emergency fund people!