Baltimore: Fixed Rates No GuaranteeSee the original article by Jennifer LaFleur, ProPublica, and Sanjay Bhatt, The Seattle Times (December 17, 2010) at:
The Guys, like many other Baltimore borrowers who ended up in foreclosure, weren't looking for a refinance; they were buying a home.
Purchasing in Baltimore was doable for lower-income families like the Guys. Julie worked with developmentally disabled adults, and Ralph did carpentry. When they bought in 2001, the median price was about $58,000, about half that in Washington, D.C., an hour’s drive away.
In their late-30s, the couple settled on an 1860s brick row house in the Union Square neighborhood, originally settled by Irish and British immigrants. They paid $35,000 and added $27,000 to the mortgage to pay for the restoration.
“We looked at 37 houses,” Julie Guy said. “My husband is a research freak, and it still wasn’t enough.”
When the housing market took a turn, along with the economy, many borrowers faced job losses and were unable to keep up with their mortgage payments. In the Guys’ case, a health-related issue contributed as well. For eight months in 2006, Julie Guy worked only part time while she was being treated for breast cancer, straining their finances even more.
Half the foreclosures in the city and county of Baltimore involved fixed-rate loans, and the Guys’ mortgage, a 30-year-fixed note, carried 8.5 percent interest. Though relatively high, the rate didn’t trigger the couple’s problems — a leaky basement did.
Three inspectors had declared the house sound, but after the Guys began tearing out plaster, they found water damage down to the foundation. Repairs quickly devoured what the Guys had borrowed to renovate. They used credit cards to pay other expenses and took out a consumer loan at 18 percent.
“Neither one of us is stupid,” Julie Guy said. “During the boom, everybody presented themselves as expert. We just got bad advice all along the way.”
After months of negotiations, the Guys obtained a loan modification. Their interest rate dropped to 5.37 percent, and their payment went down $200 a month. Like many other homeowners who entered foreclosure, the Guys kept their home. But the renovations are far from over.
“It’s still my dream house,” Julie Guy said. “I wouldn’t trade it for anything.”
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