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One homeowner's tale of lending woe
Windsor man bought million-dollar Healdsburg house he couldn't afford
Windsor man bought million-dollar Healdsburg house he couldn't afford
How could a Windsor man who supervises trash truck drivers afford a million-dollar Healdsburg home?
In this case, by tripling his income on the loan application.
Roberto Gomez said he gambled, with assistance from his mortgage broker, that the 3,400-square-foot, five-bedroom, four-bath house would continue gaining value so he could refinance into a less-risky loan. It was spring of 2005 and Sonoma County’s housing market was booming.
“I was really happy because it’s a big house. They kept telling me the values would go up. I figured I could refinance and fix my payments,” Gomez said.
But home prices began falling in Sonoma County a year later as the housing downturn took hold. Gomez’s dream home became a nightmare of debt. He owed more than the home was worth and his mortgage payment more than tripled to $6,200.
“It was ridiculous,” Gomez said.
Selling was the only alternative to losing the home to foreclosure. The house is now in escrow after the lender agreed to accept a purchase price for less than what Gomez owed on the mortgage.
Gomez said discussions with the broker at Investors Trust Mortgage identified a dollar amount that he needed to put down for his annual income so that he could qualify for an adjustable-rate mortgage. Gomez would not have qualified for the loan had he put down his actual earnings, $6,000 a month, rather than the $19,500 income he stated.
“She never told me it could happen where one day you don’t have enough money for the payments,” he said. “She was positive.”
An Investors Trust official said the company’s mortgage brokers rely on borrower honesty when completing stated income loans and that they fully inform clients of the loan terms.
“If (the income) looks like it’s out of line with what they do, you have to go with what they say,” said John Brown, manager for Investors Trust’s 20 offices. “We do not make the decision of whether it’s a go or it’s not. You’re taking the information from the borrower and then you’re presenting it to the lender.”
Brown also disputed that borrowers don’t understand a loan’s costs, saying terms and payments — both at the beginning and in the future — are disclosed several times.
Gomez has sought help from Marty McCormick, owner of McCormick and Co., a Santa Rosa mortgage broker. McCormick said that no one is blameless in the deal.
“The borrower signed it, but the borrower doesn’t know how to calculate the income needed,” he said. “They wanted to live in a nicer home, no doubt about it. If we were doing our job as an industry, we should never have let the man buy this house. And we’re hearing this story again and again.”
Brown said that stated income loans were expanded to more borrowers as lending became driven increasingly by credit scores. These loans also became popular because they required no documentation of earnings.
“A lot of borrowers went to that because it was easier,” Brown said.
For Gomez, his wife and teenage daughter, using a stated income loan to purchase a house beyond their financial means was all too easy.
The family is back living in the Windsor home they had refinanced, using money from the equity to help purchase the Healdsburg house. Gomez rented out the Windsor home during the two years the family lived in Healdsburg.
Gomez faced losing the Windsor home because the loan payments on the adjustable-rate loan were set to more than double to $3,900. Gomez, with assistance from McCormick, convinced the lender to lower the interest rate and payments for the next four years to hopefully give Gomez time to save money and perhaps regain some equity.
“Right now I will try to save this house,” Gomez said. “I’m starting over.”
In this case, by tripling his income on the loan application.
Roberto Gomez said he gambled, with assistance from his mortgage broker, that the 3,400-square-foot, five-bedroom, four-bath house would continue gaining value so he could refinance into a less-risky loan. It was spring of 2005 and Sonoma County’s housing market was booming.
“I was really happy because it’s a big house. They kept telling me the values would go up. I figured I could refinance and fix my payments,” Gomez said.
But home prices began falling in Sonoma County a year later as the housing downturn took hold. Gomez’s dream home became a nightmare of debt. He owed more than the home was worth and his mortgage payment more than tripled to $6,200.
“It was ridiculous,” Gomez said.
Selling was the only alternative to losing the home to foreclosure. The house is now in escrow after the lender agreed to accept a purchase price for less than what Gomez owed on the mortgage.
Gomez said discussions with the broker at Investors Trust Mortgage identified a dollar amount that he needed to put down for his annual income so that he could qualify for an adjustable-rate mortgage. Gomez would not have qualified for the loan had he put down his actual earnings, $6,000 a month, rather than the $19,500 income he stated.
“She never told me it could happen where one day you don’t have enough money for the payments,” he said. “She was positive.”
An Investors Trust official said the company’s mortgage brokers rely on borrower honesty when completing stated income loans and that they fully inform clients of the loan terms.
“If (the income) looks like it’s out of line with what they do, you have to go with what they say,” said John Brown, manager for Investors Trust’s 20 offices. “We do not make the decision of whether it’s a go or it’s not. You’re taking the information from the borrower and then you’re presenting it to the lender.”
Brown also disputed that borrowers don’t understand a loan’s costs, saying terms and payments — both at the beginning and in the future — are disclosed several times.
Gomez has sought help from Marty McCormick, owner of McCormick and Co., a Santa Rosa mortgage broker. McCormick said that no one is blameless in the deal.
“The borrower signed it, but the borrower doesn’t know how to calculate the income needed,” he said. “They wanted to live in a nicer home, no doubt about it. If we were doing our job as an industry, we should never have let the man buy this house. And we’re hearing this story again and again.”
Brown said that stated income loans were expanded to more borrowers as lending became driven increasingly by credit scores. These loans also became popular because they required no documentation of earnings.
“A lot of borrowers went to that because it was easier,” Brown said.
For Gomez, his wife and teenage daughter, using a stated income loan to purchase a house beyond their financial means was all too easy.
The family is back living in the Windsor home they had refinanced, using money from the equity to help purchase the Healdsburg house. Gomez rented out the Windsor home during the two years the family lived in Healdsburg.
Gomez faced losing the Windsor home because the loan payments on the adjustable-rate loan were set to more than double to $3,900. Gomez, with assistance from McCormick, convinced the lender to lower the interest rate and payments for the next four years to hopefully give Gomez time to save money and perhaps regain some equity.
“Right now I will try to save this house,” Gomez said. “I’m starting over.”
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