Our 12 Year Battle To Pay Off Our House

 

Some 15.5 years ago when you came to live at our house, we sat down. We had a father/daughter talk. I told you that the two hardest jobs that you would have in life would be independent thinking and being a mother. I went on to clarify independent thinking with the following words:

       "When everybody in the world tells you that you are wrong. When everybody in the world tells you that you are crazy. And you know that you are right, go ahead and do it!!"

        I shall dedicate these words to Elena today. I want to share with you the story of the 12 year battle to hold onto our house when 6.5 million other houses were foreclosed. I shall tell you about the battle to pay it off.

          2006-2008 was a heddy time. Houses kept going up in price geometrically. When a house came for sale around here, there were ten competing offers. A massive bubble built based on weak and poorly thought out loans. The bubble burst in 2008. Housing prices collapsed. We were living in a house that was falling apart structurally. It was infested with rats. As we lay down to sleep at night, we could hear rats running around in the ceiling above us. Despite all these deficiencies the house was worth more than $845,000 US. When the bubble burst, the house was worth $395,000. The debt on the house was $745,000. We were "underwater" $350,000. We knew that we would need some $250,000 to fix the house and bring it up to liveable standards. Our deficit grew to $600,000.

    I urged Elena to walk away from the house. Real Estate agents and lawyers urged her to walk away from the house. Elena refused to do this. She said that in her home country of Argentina, people did not abandon their homes. Elena had such conviction and strength that I decided to go along with her.

     What happened next was millions of people who stopped paying their home loans. President Obama came to power. He initiated a mortgage foreclosure moratorium. He demanded that banks do loan modifications.

       Our first battle was to get our insane home loan modified. It was hundreds of pages and a 16-month battle. I thought that our fax machine was going to melt because so many documents were going through it. At the end we got a modified loan@ 6% interest. Our debt increased by the amount of loan payments that we had not made for 16 months. This loan cost us interest charges of $36,000 per year. They refused to allow us to pay off the loan early. We were sentenced to 30 years of brutal interest charges.

    I filed in Federal bankruptcy court to get a $145,000 second lien from Wells Fargo Bank voided. The bank took this proposal seriously. They sent a famous lawyer named Austin Nagle to oppose. I got beaten in court this time.

     In June of 2011, we took $47,000 in savings and started the job to fix the house. It was a massive undertaking that went on until early 2012. Someway, somehow, we were able to raise another $200,000 US to make it happen without borrowing any money. The house became livable.

      Elena and I had been working with The Comfort Law Firm on the Wells Fargo second lien. A brilliant negotiator named Alan Sherman took over the case. He worked a miracle. Wells Fargo agreed to cancel the loan if we would pay off $20,000 US of the loan. We had the $20,000 because we were frugal and careful.

        We faced another challenge. The $120,000 forgiven loan was deemed to be income by the Internal Revenue Service. We were facing a state and Federal tax bill of $40,000 US. I read an obscure article by a New York Times author on such income tax matters. Without a tax lawyer or tax accountant, I prepared a 40-page submission for the IRS proving that Elena was insolvent at the time the loan was forgiven. The IRS grumbled and growled at me. They then agreed with me.

    The real estate market recovered. In the summer of 2015, we applied for a better loan on the house. We approached our financial institution-Sacramento Credit Union. They are good people. They have very high standards. We had to present a pile of papers to prove every part of our financial life. It seemed to be unending. We doubted that we would get the loan. We got a nice surprise with an approval in August of 2015. There was one obstacle. The loan came in $40,000 US less than the amount owed to Bank of America. We had to pay the difference. We were not allowed to borrow the $40,000 US to pay the difference.

        Again, we were frugal and careful with money. We had the $40,000 saved. We had to present another pile of documents to prove that the money was not borrowed. We prevailed. In early September of 2015, Elena signed for a loan of $507,000 US with a ten-year term.

         We set the goal of paying off the loan in 5 years. It was a battle but we made it happen. As the dust settles our house is worth somewhere between $1,200,000-$1,300,000 in value. Elena's independent thinking and strength paid off.