By JLP | November 27, 2007
From Citigroup Feels Heat To Modify Mortgages ($) in yesterday’s Wall Street Journal:
Ana Cecillia Marin, a 36-year-old single mother of three, owns a 20-year-old ranch house on a dusty, garbage-strewn acre in Palmdale, Calif. She says she earns $34,000 a year managing flower sales at a Los Angeles food store and selling clothes on the side. She bought her house in 2005 for $385,000. By taking out a first and second mortgage, she was able to buy it for no money down.
At first, her ex-boyfriend helped make mortgage payments, she says, but his construction jobs dried up. She hasn’t paid anything for months on the $76,426 second mortgage serviced by Citigroup, and she has also fallen behind on her $308,000 first mortgage, serviced by a unit of Bear Stearns Cos.
Ms. Marin says she got a foreclosure notice on her first mortgage. Judging from recent sales of similar homes in the area, it’s unlikely that Citi Residential will be able to recoup money owed on the second mortgage in the event of a foreclosure sale, because the first-mortgage lender gets its money first.
“I’m afraid I’m going to lose it,” Ms. Marin said recently of the house. Already, she had moved most of her belongings into a wooden crate in the yard. All that remained inside were the mattresses on which she and her children sleep.
This woman was destined for disaster!
I just did a hypothetical mortgage amortization using her purchase price of $385,000 and a 30-year fixed mortgage at 6.3%. Her principal and interest payment (not including property taxes) would have been $2,383 per month (her monthly income was $2,833). Her monthly payment would have represented over 84% of her income! Yes, the article did say that her boyfriend helped with the payments, but he wasn’t included in the mortgage. In other words, this woman should have NEVER been approved for this mortgage!