From the Record:
What do you do if you’re a single mother who can’t afford your mortgage payments of more than $3,700 a month, but can’t sell your house for anywhere near the amount you owe on the mortgage?
That’s the dilemma facing Anna, a Bergenfield woman who bought her Cape Cod, no money down, for $445,000 two years ago. Now, in a much slower market, her real estate agent says she’d be lucky to get $380,000.
The solution for Anna, who asked to be identified by her first name only, is the one being used by an increasing number of distressed homeowners: a short sale.
The number of short sales is on the rise, both nationally and in North Jersey, though they still make up only a small fraction of all sales.
“The values of a lot of these houses were inflated as a result of the real estate boom. Now we’re in a bust. The values aren’t there. It’s all starting to catch up with everyone,” said Frank Ciambrone, a Rochelle Park real estate lawyer.
And it may be getting worse. Bob Caruso, national servicing executive at Bank of America, said requests for short sales have accelerated over the past year.
“We expect 2008 to be a very tough year, especially if the job situation worsens,” Caruso said. “It’s one thing to have house prices decline, but if unemployment increases, that’s really a deadly mix.”
“A lot of people making $80,000 a year were buying $600,000 houses because of the interest-only loans and teaser rates that were in place,” said Angelo Di Ianni of New Century Realty in Clifton. But eventually the interest rates adjust upward, and the homeowner has to start paying on the principal.
“I don’t know how some of these people got a mortgage to begin with,” said Jeff Bennett, owner of New Jersey Home Relief in Wayne, a company that works with short sellers.
Another short seller, a Lodi woman who asked not to be identified by name, owes $620,000 on her two-family house, which she bought in 2006. She’s a saleswoman who works on commission, and got a so-called stated income mortgage — one where the borrower is not required to offer proof of income. She said the mortgage broker encouraged her to overstate her income to qualify for the loan.
But when her commissions slowed down, she found she could not afford the monthly payments of $6,100, even with her tenant’s rent check. She found a buyer willing to pay $525,000 — which she said was in the market range for the house — but in the long wait for approval from her lender, the buyer gave up on the deal. Now she is looking for a new buyer.
“I’m partly to blame,” the homeowner said. “I should have known better.” But she thinks the lender should have known better, too: “I should never have been able to get that loan, and I’m sorry I did.”