credit-card

It has been a year since we decided to walk away from our mortgage on a condominium that was underwater financially, but also was saddled with the additional burden of a construction defect lawsuit. Our foreclosure went fairly quickly, thankfully, and it was eight months between the last payment we made and the auction date. The hard facts: We stopped paying our mortgage in December 2009 and the foreclosure went through in August 2010. We owned condominium so we continued to pay our monthly dues and our property taxes. We checked our credit score this January 2011 and the score had gone from the 700′s to 615. During the time we were in foreclosure we received twice weekly phone calls from Chase- none of which did I answer. When the first call came in I let it hit voice mail, checked the message and added that number to my phone so I always knew when they called. I received numerous letters of collection from Chase. We actually received one from the mortgage insurance company at the end of our foreclosure process urging us to make our mortgage payments. I assume this is because they did not want to have to pay the bank for the insured mortgage. I thought it was pretty funny and added their letter to the shredding pile. We attended our foreclosure proceeding, which was held outside of an office building at a picnic table. Fifty or more real estate agents with property lists and stacks of cashier’s checks circled like vultures waiting for the prime properties to be read off. Ours was not a prime property so it reverted to the bank. It was an interesting process to see in the flesh. Our foreclosure was on a Friday and on Monday a Fed-ex letter arrives from Chase again urging us to make payments. Again I thought this was pretty funny as the foreclosure was now done and over with. I mailed keys into the real estate agency that took over the management of the property from- Not Chase- but now Fannie Mae- our mortgage had been sold at some point- we were never notified. A week or so later I received a letter from an attorney- many attorneys sent us letters along with real estate agents all claiming they could help us. This letter stated if we were tenants of the unit we needed to send in our lease. Since we had moved out I sent no paperwork and ignored their letter. The next week I received another letter saying I was being taken to court for not vacating the premises and had to send a letter to them and the court by said date or face paying legal and court costs. Furious as I was considering I had sent keys to the real estate agent managing the property and had moved out in March, I filed a letter with documentation with the court and sent the same letter to the attorney. I never heard from them again so I assume it was finalized and no one had to waste any further time on the matter. We did not have difficulty renting a home during our foreclosure and have not suffered any recriminations from our creditors at this point. One credit card which ironically we had closed already and are paying off sent us a letter telling us they were lowering our credit limit. Again we thought this somewhat humorous and added it to the shred pile. I just received a tax document in the mail, which has to do with our walking away from our mortgage. I have yet to do our taxes and am hoping that it will not penalize us financially. We shall see. The condo: Our mortgage was a zero down, fixed interest rate loan from Washington Mutual with whom I had been a customer for five years or more at that time. We purchased a property that was less than the approved amount they gave us for a home loan. We sat down and did the math and figured with our debts and wanting to eat more than rice and beans what amount we could actually afford for our monthly housing payment. I was excited to finally own a piece of property, my own home, even if it was just 1,023 sq ft and a condominium to boot. My husband had wanted to keep renting but I just wanted out of that feeling of being beholden to some random landlord and their whims. Somehow being beholden to a faceless corporation did not bother me at the time. Perhaps because of my living with credit debt so long I was just used it and it was comfortable to me. Also rental rates in the area we lived in at the time were sky high as people were demanding a lot for very little. I felt we would get just as tiny an apartment renting as we would buying a place. Ideally I wanted a house but the cost was too great for us to attempt. I had also just lost my maternal grandmother who raised me, to a year long struggle with Congestive Heart Failure. I cared for her during her illness and was there with her when she passed. I was also caring for my then two year old daughter. I craved stability and a safe shelter out of the storm my life had become. At first we were fairly happy, the space was very small for us, a family of three, but it was alright. For a long time I clung to the idea it was my house, I owned it, and somehow finally I was one of those people that was not a “renter”. A respectable homeowner- that nod of approval you receive from banks, and other financial institutions when you go in to apply for a loan, buy a car, or even get a cell phone with family plan at AT&T. Somehow you are suddenly worth more in the eyes of the world. I was not a different person in any way except I paid an obscene amount of money every month on a mortgage that included mortgage insurance. Since we lived in a condominium we paid dues each month as well so we were at around $3K a month for a tiny little place in the heart of a busy neighborhood that was honestly never quiet. In the first six months of our moving into the building the condominium board had hired an attorney to proceed with legal action against the developer of the building. I was on the board and was privy to what was going on with regard to the lawsuit and the construction defects. It was then that somehow my bubble burst over my head and I thought what have we done? What have I done? What can we do to get out of this mess? Should we stick it out? Should we try to sell or rent our place? I researched our options with a feeling of dread building in my stomach. I contacted several real estate agents that told me a property in litigation has zero chance of being sold. I listed our unit for rent for several months without as much as a nibble. About this time the credit card companies started raising interest rates on customers to unjustifiable amounts. Again we always paid on time and were never late. We carried a balance, fairly high, but always we paid and on time. When the letters came out with the either or option; either you close your account and keep your lower rate and pay us off, or you pay a higher interest rate and keep using the card- we closed the accounts. It was painful because that crutch of credit we had always had available to make up the difference in expenses for groceries or needed items suddenly vanished. A crutch we should have never depended on but I am being honest here it was there and we used it, we had to eat. It was not long after the credit card rate hikes that I reviewed our property value assessment from the tax office and noted our value had dropped by about 10K The second year in the condo was the year I started getting sick. I would have bronchitis and be treated with antibiotics and be back after a day or so of being off the medication with another bout of bronchitis. I went through five of these in a row, I also had tracheitis, and severe sinus infections too numerous to count. I finally decided it was the environment I was living in since the doctors could find nothing wrong with me through blood tests and the fact that I don’t smoke or spend time around cigarette smoke. One of the owners in the building found mold in his walls when he was remodeling his unit. They found mold in a few other areas of the building but lawyers did not want to pursue this as part of the lawsuit. Financial Background : At first it was liberating to have a month, particularly being December as we celebrate Christmas, which we did not have a huge mortgage payment and little else left over. We did not spend extravagantly on gifts as some might assume. I paid bills that were due but that had been piling up a bit over the last few months, not credit debt, but those additional fees that one owes from doctor visits and other medical related expenses. It was a relief to my ever acid churning gut to put checks in the mail and get those nagging invoices out of my To Be paid file. I bought groceries and not just a few bags but the liberating feeling of filling ones pantry for a change. I did not have to walk to the market with calculator in one hand and coupons in the other and make choices between what we had to have to get by and a few simple extras like a bottle of diet soda for my husband or a small treat for our daughter. Not to say that I did not use my coupons, watch for sales and shop other stores for lower prices. Being strapped for cash for so long starts to leave a mark on you psychologically. You get in the habit of not having funds to spend on much of anything, food or otherwise. Pinching pennies becomes a way of life to the extreme. While we did get Christmas gifts it was nothing expensive, we bought things like new socks and underwear because our essentials were getting a bit threadbare. A new pair of shoes for my husband because he had worn his shoes down walking 25 minutes to and from a free park & ride, rain or shine, every day to save money on parking expenses. I can’t recall how many birthdays and other gift type holidays we skipped as far as gifts go, and how many times we had to postpone a birthday dinner for ourselves indefinitely because the funds were just not available for anything accept our debts and mortgage expenses. Neither my husband nor I grew up with much in the way of money. My family, consisting of a mother, grandmother and myself never owned anything with regard to real estate. We never even had a car when I was growing up; we took the bus or walked. I stood in food lines with my grandmother as a small child observing at that time that most of the people in line were elderly and looked just like everyone else. We all received a large block of orange Government Issue cheese, sometimes the white labeled can of mystery meat and a few other staples. Oddly I did not feel humiliated in any way. I was just there observing what went on and how people survived. We canned our fruits and vegetables, used coupons, scrimped to get by and never had any savings because there was never anything left to save. My grandmother was on disability; my mother worked full time and went to school at night. There was no support from my father. We paid the rent, utilities, grocery bills, and daydreamed because that was all we could afford to do. Actually we were really great library patrons during those years. I love to read and libraries were free. We had no credit debt at that time in my life. The experience of eviction because we could not pay the ever increasing rent fees demanded of us, the poor treatment that we received because we were “renters” and could not supply proof of income that could pay double the monthly rent and also have enough saved for first, last and deposit left a mark on me. I hate renting! I hate leasing! I hate being beholden to someone’s idea of what a good person is and that means having money. If you don’t have lots of it in savings or on your balance sheet then somehow you are less of a person than someone who does. We moved a lot — 21 times by the time I was 20. I have moved a few times since then of my own volition. I wanted to own my home for as long as I can remember. The idea was that it was mine and that I could live there safely without fear of eviction or persecution from a landlord that decided that he wanted to double the monthly rent telling us we had 30 days to get out or pay up. The truth is in this country if you are a home owner then you are an established respected individual versus the poor schmuck that has little to their name in assets, even if they are just as hard working and decent as the person who owns property. As I grew older finances in our lives improved some but we always rented apartments and never had a car. My mother got into credit debt when I was about nine years old. She did what she thought was the more responsible thing and went Chapter 13 instead straight bankruptcy. I hated her for that since again we had no money. Every month we made a trek downtown to the offices of Paul Wolf (yes that was his name and I remember it well) and made her debt payment. Trust me any time I asked for anything, dance classes, new clothes, a trip to a nearby city, a weekend matinee movie, I was always reminded where every single penny of our extra money went- to Paul Wolf and my mother’s misguided ideas of doing the right thing. She would even whip out the checkbook and show me what money we did not have and what money we had and where it was spent. I started working early, volunteer work at first, and then paid work at 16. At 17 I was standing on my own pretty well and working full time at a now defunct retailer. I was offered a credit card by Citibank. I applied for it thinking I might get $500 which would be nice as I was starting college early while I worked retail. In the mail arrives a $10,000 Visa and I thought I had hit the lottery. My grandmother had counseled me closely on finance and how I had to pay off my credit card each month, how I should save money for my future, that I should always pay my bills on time and always maintain a good credit score as this was the key to opening doors for my future financially. If I wanted a home, a car, loans, etc I had to have an excellent credit score. Well I listened to two of those pieces of advice; I listened to all of it, but ended up only following through on two items. I always paid my bills on time and always maintained a high credit score. That $10,000 was just the beginning because other credit cards seemingly appeared in my hands like magic. Not one of them had a limit under $1,000. I had reported my income honestly, which was a retail hourly income in the 1990′s. No way did I make enough to actually qualify for any of this money but there it was and here I was finally being able to buy things I wanted like new clothes more than a couple of times a year. I became like many people, a slave to my credit cards, my entire income went to the credit card payments and I lived off the available credit. A nasty hamster wheel of a cycle to live in but once you are there, there is no way out. I did not want to throw in the towel and file bankruptcy. I made the bills and felt like somehow someway I would earn the money to pay it off. I went to college at night and worked full time during the day and after eight long years earned an AA degree and managed to work my way up from a phone operator to a manager in the finance department. My debt traveled with me and I finally got to a financial point where I could start getting rid of my debts. Slowly I started paying some off and always if there was a tax refund a credit card got paid off or down. When I met my husband I was 40K in debt but managing the payments, although I had nothing in savings. I wanted to save but there was no chance of that with my bills. I went to a branch of Washington Mutual- now Chase and applied for a loan for the full amount of my debt. I wanted to pay them $800 a month on the debt and close all my credit accounts, and pay off my debt in about five years. They refused to even consider it since I had no collateral, I had not purchased a car or bought a home, but they offered me a line of credit instead. I took the line of credit and moved a higher interest amount onto it and continued to pay my bills. I paid faithfully on these debts I made for years; I still pay them every month without fail. I have never been late and never once defaulted. I made those debts and it is my responsibility to pay it off. Financial Truths: My husband purchased and read through a book entitled “Web of Debt” by E. H. Brown and wow what an eye opener it was for us. While I don’t propose to endorse the entire book and its contents, since I was never a student of economics, but the base facts of who controls our currency and the history thereof remain invaluable. We are taught to trust that banks have the funds to loan us for homes, cars and lines of credit. We are taught that they have assets that have value and that somewhere in the country is a big vault full of actual currency that belongs to the bank. When the truth is they create money out of thin air. When we opened our mortgage account with Washington Mutual they simply added an account with a dollar entry under our name. They never removed that amount of money from an existing account of available funds they had to loan. There is not enough actual physical currency circulating in the country to cover the amount of debts that are out there. It is an odd realization to find that the Federal Reserve is not a Federal Government institution. The Federal Reserve is a private corporation owned by some of the largest banks in our country. It is rather ironic that we have spent so much time and money bailing out banks that are part of the Federal Reserve, the private corporation which dictates how much money is available to us as a country and at what rate of interest we must pay for the privilege of using said currency. We are taught to feel we owe our loyalty to the financial institutions we do business with because they care about us as consumers, even as people. What I learned from my experience of homeownership and walking away from our mortgage was that it was all lie. The bank was not interested in us as consumers or as people. Even with a high credit score in the 700′s they would not consider lowering our interest rate. Somehow we did not qualify but then I don’t think there really is an average person who qualifies for the best interest rate available. To me the system as it was based on credit scores, homeownership, and responsible debt management has to be reevaluated. I have heard financial analysts try and convince people that things are like they used to be. That credit scores matter, that homeownership means something, that we should save our money and pay off our debts. Am I irresponsible for walking away from a money pit that I could never sell and could not live in and be healthy? No I am not! I chose life instead of being owned by a thing. For a brief period it gave me a false sense of security and of self worth financially. Now I look back and see the illusion that we are taught to buy into as consumers. Do I still pay our monthly credit debts? Yes I pay them their minimum payment amount every month and they can have just that until they finally go away. I am in no hurry to pay them off. Will we pay more interest over time doing this? Of course we will but then again in this economy if I take the extra we have and pay off a debt, if my husband loses his job next month then I will have nothing to live on at all. You can’t trust your credit cards to be there and you certainly can’t expect empathy from them if you are out of a job and need a month or two leniency. Do I blame the banks that gave me credit for my credit card debt? The error I see in their actions was this: giving a 17 year old a credit card for $10,000 and then other companies for sending me cards without my having solicited their product. Is it my fault I went into credit card debt? – Absolutely. Without hesitation I take full responsibility and still comply with my end of the agreement by always making my monthly payments. Credit cards gave me the means to pay for a college degree when I could not have paid it otherwise. The naysayers out there will wag their fingers, and shake their heads. “You could have saved for it,” they would say. Certainly I could have remained in a low paying job, barley getting by and tucked my pennies under my mattress hoping one day I might be able to attend college and better myself. “Student Loans,” I hear people shout at me. I considered it and even filled out the paperwork but then shredded it. Why? Because I was struggling to an AA degree paid for. I had yet to even make it to an actual University and I was contemplating taking out student loans? I thought it foolish and decided that using my credit cards was a better option. Save student loans for a bachelor’s degree at a University where the fees are truly out of reach. You ask me: I am willing to pay off my credit debt but not my mortgage why? Because I could actually pay off the credit debt and because I received something for the debt I created. I paid for my college education with those credit cards because I could not get financial aid outside of applying for student loans. With the mortgage debt I feel like the bank came out even and then some. They have the property back in excellent condition and they made money on what was basically a rental for over two years from us. They can sell that property again when the market rebounds or rent it in the interim. Plus they had us paying mortgage insurance on the property so they get payment from that as well. To me the differences in walking away from a mortgage and paying off credit debt are quite clear. I honestly see no changes in finance for our future as country. We have a definite division of class now, rich and poor. Few of us live in the middle any longer and those that do; we hang on by a thread and prayer.