The Difference is in The Details

There is an interesting story in the telegraph today about a Nashua home owner on the verge of losing his home.  You can read the story in full here.

Here are the key details:

Since 2000, when the couple bought their home just off Bridge Street, next to the National Grid natural gas utility, the Prevos had been able to stay current on their mortgage.

But in September, at age 44, Fred suffered a heart attack.


the company had issued pay cuts, from $14 an hour to $11. Moreover, because of his medical condition, Prevo could work only part time on light duty for a few months.


Lee, 47, has a serious back problem, but still holds a job as a certified nurse's assistant at a Massachusetts nursing home. Her pay is modest and it became clear to the Prevos shortly after Fred's attack that they could no longer make their mortgage payments of $1,445 a month.


They all tell the family to pay up the entire debt of $190,000, or get out as quickly as possible.


The Prevos' children have been helping out as much as they can. Joe, 22, turns over his entire paycheck from Wal-Mart to his parents each week. Natalie, 19, works at Fashion Bug and helps with the bills as well, her mother said. Fred's prescriptions alone carry a $200 price tag each month, he said.

So let's put together the details without any of the drama.

They purchased the home in 2000 and had been current on all payments until Sept. 2008.

His pay was cut from $14 and hour to $11 and he can only work part time.

The wife works as a certified nurse's assistant.

Housing payments are currently $1,445 a month and they still owe $190,000.

On top of other living expenses he pays $200 a month for medication.

Now looking at only the details of this story does anything jump out at you?  It should.

If they had been paying $1,445 a month for over 8 years they would have paid out over $138,720.  If they still owe another $190 on top of that then they were paying out well over $328,000 for their home.

What is also telling are the details that are NOT given.  For instance, they point out that the wife works as a certified nurse's assistant but they do not list her salary, only his.  I looked that information up and found it here.  The national average is $24,993 with the range being from $20,303 to $34,493.

Let's assume she made the bottom salary of $20,303.  He was earning $14, so assuming he worked 40 hours a week with no over time he earned roughly $29,120 a year.  So between them they were making about $50,000 a year.  If they owed over $328,000 on just $50,000 a year then its a little hard to feel sorry for someone biting off that much.  Even at the highest range putting them at around $64,000 per year a montage that much is a bit too much to expect to be able to pay.

But alas, the details left out of the story do not end there.  The telegraph readers did some researching and found the original price of the home which isn't listed in the story.

According to the original sale price of the home in 2000 was $93,000.  Nearly $100,000 LESS then they currently owe.

So how exactly did a family go from purchasing a home for $93,000 in 2000 and while staying current on all their payments find themselves in the hole for $190,000 just 9 years later.

In 2001 they refinanced this time for $97,000.  Ok, I'm sure with better interest rates they came out ahead even with a large bottom line.

In 2003 they refinanced again for $149,000.

In 2004 they once again refinanced for $182,000

In 2005 another refinance for $198,000

Now they've doubled what they owe but the hole digging doesn't stop there.

In 2007 a $36,000 loan was taken out on the house on top of what they owed.  Now they are in for $234,000.  That's over 4 times their annual income.

And this is why the rest of us are seeing more money taken from our paychecks to help people who dig themselves into debt well over 4 times their salary?  I feel bad the guy got sick but banks are businesses, they loan you money with the expectation of getting that money plus the interest back.  If they don't get it back they can't loan that money to the next person and we get the kinds of problems we're seeing today.