By: Ellen E. Schultz
Source: The Wall Street Journal
In 2006, Carol Couts, a 66-year-old widow in Yuba City, Calif., was living in her home, payment-free, when a mortgage broker persuaded her to refinance her no-cost mortgage for one that exceeded her monthly income by more than $400.
She can’t afford the payments, and unless her lender modifies the loan to make it affordable, she’ll lose her home of 25 years. She’s given away most of her furniture and her cat, and packed her belongings in cardboard boxes. “We’ve got nowhere to go,” she says, referring to herself and her dachshund, Ollie.
Many of these homeowners had lived for decades in their home and had built up substantial equity, but had low incomes. This made them tempting targets for brokers who persuaded them to refinance their mortgages, telling them they could lower their monthly payments. Instead, many of these loans were loaded with fees and exploding interest rates and quickly became unaffordable.