Monday, March 31, 2008

The No Bailout Poster Child

CNN recently ran a story about the middle class getting pinched "From $70K to food bank, one family's struggle"

"When she was laid off in February, Patricia Guerrero was making $70,000 a year. Weeks later, with bills piling up and in need of food for her family, this middle-class mother did something she never thought she would do: She went to a food bank."

Guerrero is estranged from her husband and raising her two young children. She's already burned through her savings to help make ends meet, and is drawing unemployment checks. She has had to take extreme measures to pay for her interest-only mortgage of $2,500 a month. In fact, her mother moved in with her to help pay the bills. Guerrero even applied for food stamps, but was denied."

On the surface it seems like a story of a middle class family falling through the cracks and getting pinched by the housing crash.

But dig deeper and you see that this was just another example of a family living way beyond its means, and finally getting caught.

According to this blog, "On the surface, this does seem like a true unfortunate soul. However, when you poke the story with a stick and say, 'boo', well, lets' just say Guerrero doesn't warrant much sympathy.

The 2,948 square foot house in question was purchased from her estranged husband's parents in August of 2002 for $202,000. By August of 2006, she and her husband refinanced this home a couple of times, finally winding up with $649,999 in debt loaded onto the house. That's close to 450k in cash out refi action in 4 years, 100k a year....and what was purchased with this so-called equity? If you watch the video that accompanies the story, Guerrero makes mention that she took off her Tiffany bracelet and left her Coach handbag in her car when she strolled into the food bank. In the photo, she is also surrounded by a sea of granite, so the 450k more than likely financed some pricey remodels as well Tiffany bracelets and Coach handbags.

Patricia Guerrero is not deserving of any sympathy because at 70k a year and being in the mortgage industry, she should have known she couldn't afford a 650k loan...even if the husband that bailed was making 70-80k himself. They may have used some 'liar loans' (stated income, no income verification, etc) to make the loan fly on paper, but in reality they bit off way more than they could afford. "

I'm sorry, but they really don't deserve to keep the house. They've basically already sold it, pulling $450k out if it, and for what? Looks like a nice kitchen remodel, a tiffany bracelet and at least one coach handbag.

This woman needs to stop looking for her bailout and figure out how to provide for the kids. It's obvious there were no savings, so maybe it's time to sell the house and find a cheap rental, or sell the bracelet and the coach bag, or god-forbid find a interim job to cover some of her expenses. I'm tired of people looking for a bailout. Own up that you made a bad decision and figure out how to get out of it. Cut your expenses, figure out how to get some income, and don't make the same mistakes again.


Kirk Coburn said...

I could not agree more with you PDX Outsider. I work in the biz and know several people that went from $50,000 "Disney Dollars" per month to $2,000 per month. They are not really the saving type either. Will be interesting to see how they cope with losing $1,000,000 homes, having $50,000 cars repossessed and all the other adverse effects since the days of Disney Dollars are long gone. It is a disgrace that said woman in story would get any sympathy. There are plenty of others, even in our own country, who are truly impoverished and more deserving of a helping hand.

elneal said...

Wow- that is living "the dream"- especially if someone will come to pick up the pieces for her.
I don't wonder or care what a family like that did with all the cash they took out of their home- I only hope she doesn't get any help to keep it.

Patient Renter said...

It's incredible, to me, that bloggers are able to dig up the real story on these losers, where big mainstream media seems to come up short. This is not the first time this has happened...

You guys excited about the prospect of paying this lady's mortgage? If not, tell everyone you know about the Dodd/Frank bill, and why it's not a good idea.

Anonymous said...

Last year I was teaching money management skills to homeless families. I met families who couldn't afford housing who were driving Lincoln Navigators, servicing huge debt on car loans and living in temporary housing for the homeless. Some regarded cable TV as an essential, others regarded manicures and lattes as essentials. They were all just keeping up with their neighbors, keeping up appearances.

On another note, did you see the piece in the O last week? The tone was weird, seeming to lament the fact that homeowners won't be able to finance college educations or vacations from home equity loans anymore. Is the journalist living on another planet or just uninformed? Are there still people out there who don't understand basic math?

Anonymous said...

How did the blogger get the backstory?

PDXOutsider said...

"On another note, did you see the piece in the O last week? The tone was weird, seeming to lament the fact that homeowners won't be able to finance college educations or vacations from home equity loans anymore. Is the journalist living on another planet or just uninformed? Are there still people out there who don't understand basic math?"

No, i missed that. The O's website sucks, so I rarely read it. Do you have a link?

I've never understood the concept of borrowing against your house, with the idea that the increase in value will make it up. It's still a loan, and you still have to pay it back. It's not free money.

And yes, unfortunately there are lots of folks who don't understand basic math, or have never created and stuck to a budget. But driving a Navigator and not being able to afford rent? That's just moronic.

PDXOutsider said...

"How did the blogger get the backstory?"

I'm not sure, but it helps that bloggers don't have to worry about pleasing advertisers, so they can be more honest.. Most people also wouldn't agree to be featured if all their gory details would be revealed.

There is an amazing amount of information out there these days, most of it free. If your house goes into foreclosure I can see what you owe on all your mortgages and to whom, as this is all public information. I'm sure the blogger found similar information on the family in the article.

Anonymous said...

You suggest they sell their house. Don't you realize you can't sell a house in CA. We are currently getting offers 230,000 below the price we bought it in 2005. I do not agree with using your house as a bank. However, there are a lot of people in CA that need to sell and are unable to. PDX will soon experience the same doom and gloom my friends....just wait!

PDXOutsider said...

anonymous 12:19, I'm sorry to hear that you're that far upside-down on your house, what part of CA is that?

And I agree with you that we will soon see the same thing here, I see more and more short sales coming on the market daily.

Back to CA, I agree that anybody that bought in CA and other places in the last few years is likely facing foreclosure, or sitting tight until things improve. But my point was that for many people who are living in a house they can't afford, they seem to be doing everything they can to save the house, when they'd be better off selling it and renting something cheaper. But there seems to be a major stigma against renting in the US, that it's inferior to owning. I can tell you I'm thrilled to be a renter with no maintenance, taxes etc. to worry about.

Good luck selling your house.

Anonymous said...

I agree about selling the house and renting. House sales stopped on a dime last summer. Houses are not selling anywhere in CA. My house is in OC. We can't even find renters with good credit. We are renting in PDX. We found a couple that is losing their house to foreclosure. Believe it or not...they have the best application that we have come across yet. I do not agree with people using their homes as banks. However, we need to look at the trickle down process. Homes in foreclosure are dropping the price of non distressed homes 25% below last years comps. Soon everyones bottom line is affected...even uncle sams. States are losing revenue big time due to loss of property taxes that they counted on a year ago. That is why the feds are trying to help people. Because in the long run it affects everyones bottom line. What a mess! Anyway, I love this website and I love reading various opinions! keep em coming!