36

The housing crisis, in retrospect

The Sinclair family in front of their home in Patterson, CA.

Tess Vigeland: We met the Sinclair family of Patterson, Calif., three years ago, just as the housing crisis was coming to a head. Patterson is a subdivision just off Interstate 5, south of Stockton.

The family had stopped paying their mortgage and were, essentially, squatting in their own home. They it bought in 2005 for $440,000. When we visited in April 2008, it was worth less than half that. They wrote to us recently with an update. So we went back to Patterson for a visit.

Dan Sinclair: Welcome back!

Vigeland: Dan! How are you?

Dan: Nice to see you!

Vigeland: Good to see you!

Dan: Come in, come in. Watch out for the train tracks.

Vigeland: Oh my goodness.

A kid's train set took up most of the living room floor. Dan Sinclair is a 46-year-old systems analyst. He, his wife Esmerelda and their three kids now live in a rented home just a few blocks away from their old house.

Vigeland: Last time I was with you, we took a walk around the neighborhood and it was astonishing to see how many foreclosure notices were on doors, dead lawns. This doesn't look too bad.

Esmerelda Sinclair: It's getting better. Next door, the house was empty for over a year. And it just got occupied by renters.

Dan: It's a mix now of renters and people who own the house. On the left, we've got some renters and they're always cranking the loud rap music. Not that there's anything wrong with rap music, but because I don't...

Vigeland: So more renters in the neighborhood now than there used to be.

Esmerelda: Definitely.

Dan: Yeah, including us.

Vigeland: Including you.

Dan: But we're nice renters.

When we profiled the Sinclairs three years ago, they knew they would not get another 3,600-square-foot home with a four-car garage and a pool anytime soon. One lesson they learned was that a big house wasn't worth a big mortgage. The one they're now renting is a 1,000-square feet smaller. But they are still dealing with the financial aftershocks of the last one.

Dan: Looking back, I don't think the bank ever really intended to work with us at all. They wanted to push into foreclosure, and they did. And they sold it for less than what we wanted to renegotiate for.

Esmerelda: You know, at least Dan still has a job, which has been...

Dan: See, that's been the saving grace, is that I've kept my job through this whole thing. I'm pretty well compensated and I was still able to do a Chapter 7 bankruptcy and that's what we had to do to get rid of our debt.

Chapter 7 bankruptcy. Why such a desperate measure? Because they owed almost $200,000 on their home after taking out equity loans. And they owed $500,000 on a second rental property that they were trying to sell. In the end, they lost both homes.

Dan: You know, there's something else strange that has happened as part of this process. Now we're in the clear, I can't declare bankruptcy for seven years, so financially, I'm a really low risk. But the banks will not lend me money.

Vigeland: But wait a minute, wait a minute. Are you telling me that you think you should be able to get another mortgage?

Dan: I do.

Vigeland: Three years after basically losing two homes? How does that make you low risk?

Dan: Well, I guess it depends. If you look at the pattern of was there reasons for that? I mean, how many people are out there -- 20 percent of the residents in this area are like that? You know, this house that we rent, we pay $1,400 a month. I can own this house if I bought it and pay less in mortgage than what I am paying in rent, which is kind of a heartbreaker for us. Yeah, I consider myself a really good opportunity for someone to loan money to, history aside. Because I don't think the history...

Vigeland: But you can't say "history aside."

Dan: But that doesn't indicate the level risk here. I can't declare bankruptcy for another seven years. They should be banging down my door, because they're going to make their interest money back regardless or put me in debtor's prison. I mean, there's nothing I can do if I tried to default in the next seven years. I'm not the bad guy! I mean, whatever.

Vigeland: But, wait a minute. Look at this from the point of view of people across the country who are going to hear this and say, "Waaaaaaaaaaait a minute!" You were part of a serious problem. I mean, yes, banks certainly had a large role in it. But so did home owners who got themselves into homes that they couldn't afford.

Dan: Yes, I think we made risky decisions. I'm really surprised by your surprise! How much do I have to pay for my sins, if you will, you know, we through an incredible stress.

Vigeland: What has this done to your credit scores?

Dan: Well, while we were going through it, they were down to 550. As soon as I closed my bankrupty, it went up to 630. So, you know, that wouldn't get us a very great loan, but we're back in loan territory except for the bankruptcy and the history.

Vigeland: Yeah, except for that.

Dan: Yeah, it's so funny. Your surprise is so funny to me. It's kind of a wake-up call from where we see things. When I talk to our friends and stuff, nobody looks at us as part of the problem. We all kind of look at ourselves, not as victims, but as not guilty in this whole process. Maybe that's not realistic or self-preservation, but when I talk to people at work, either they're holding their tongues or they don't say, "Well, it was partly your fault." Because I guess, we've all done it out here.

And surely that sentiment is not exclusive to the Sinclairs. It's a frustration millions of home owners nationwide are grappling with. You can hear our original visit with the Sinclairs from three years ago here.

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"You know, this house that we rent, we pay $1,400 a month. I can own this house if I bought it and pay less in mortgage than what I am paying in rent..."

Had he bought a house with a payment of 1400 (fixed) to begin with we would be listening to a different story. But then he wouldn't have hade 3600 sq ft, 4-car garage and a pool.

I was so angry listening to Dan Sinclair express his "surprise" that listeners might consider him a loan risk. Not only that, his disparaging attitude toward renters was particularly rich given his situation. My husband and I owned a home and sold it when his job changed. That was enough -- owning was a headache we decided to do without. Now, because we're "renters" we're considered undesirable even though we were responsible with our money and didn't file for bankruptcy. This guy's attitude is a great example of what's wrong with the U.S.

I'm sorry, but Dan Sinclair is wrong. He is not a good credit risk. His past actions have shown that he is not to be trusted with large amounts of money with out a major down payment of his own money. He complains that he can't get a loan and should be seen as a good risk because if he does not pay they will put him in debtors prison (something we don't have in this nation). I am sure if he showed up at the bank with 20% of the cost of the home he wants to buy, that would only reflect 15% of his monthly income as a payment for the loan, and a 3 to 5% of savings for other costs, as well as NO OTHER DEBT, banks would be falling over each other to give him that money. Instead he complains that after losing two homes, one by just not paying anymore while living rent free till they kicked him out, that he should be given money because he went through the emotional process of bankruptcy and that paid for his sin of not paying his debts he took out on his own free will.

Mark Sullivan & I are on the same page.
I don't have outstanding credit balances, paid 20% down and bought a particularly tiny house, < 1100 sq ft.
Live within your means.
What's the lesson for the Sinclair children?
Wow, his denial just blows me over.
The number of horrified people that have written here should be an eye opener to Mr. & Mrs Sinclair.

I was also driving on the Interstate when I heard the program featuring Dan Sinclair. Vigeland held his feet to the fire and I would have helped her til he begged for mercy! His rationalization for justifying the bankruptcy was unbelieveable and underscores the "new mentality" about the commitment one makes when getting mortgage. As a final note,at the end of the interview he says that friends or co-workers never blame him for defaulting on the mortgages--boy! is he clueless and/or stupid...too bad they are spineless and don't tell him to his face.

I honestly can't believe I had to listen to the "garbage
" spilling out of the gentleman's mouth about how he is credit worthy and the like. In my opinion, for someone with a job and the means...Make him pay off if not 100% of what he owed, then at least 80%. It's in part because of strategic defaulters like him, that those of us who own places we can't sell are stuck renting them out for less than our costs, looking of loses in the 6 digits...And his comment of how he can "buy the place" cheaper than his rent? have you perhaps considered that the mortgage of your landlord is not based on the "new" value on the house but what he might have paid for it 6 yrs ago? Hm...What a concept. Regardless, no sympathy here about the family of 5 with 4 car garage and a pool. If it were up to me, i'd stick them with the dept over a long period of time and have them pay off as much as they can. 500/month certainly wouldn't hurt that much. And this is on the basis of principle. I don't have much love for the banks but to somehow absolve people who signed documents for loans they were unlikely to pay off and blame it on "no one explained it to me..." give me a break. There is such wealth of information online, and has been for a decade and a half that anyone who is signing for a loan simply can't claim the " i had no idea"

There is PLENTY of Blame to Go Around for the Mortgage Crisis.
The Banks, the Realtors, the Brokers, the Home Buyers; just to name a few.
EVERYONE was trying to CASH-IN for various personal reasons.

Fast-forward +7 years later, and we are now witnessing the Devastating Consequences.

Dan asked: 'How much do i have to pay for my Sins?'

To which Many Listeners responded: 'Start with the $440,000 that you promised to pay on your Mortgage.'

I understand this Response.
However, 'Chapter 7' Bankruptcy Exists for a Reason.
Filing "Chapter 7" was the price Sinclair paid to absolve himself of his Debt.

Major Corporations file for Bankruptcy all the time, for various reasons.
Often times, they emerge from it in a Better Situation.

As Individuals, we Have this same Right.

Many Listeners have called Sinclair irresponsible:
But Do you really know Dan Sinclair's Credit History as a whole?
Did he spent hsi LIFE spending recklessly?
Is he a Chronic Defaulter?
Has he filed for BR once, twice, three-times before?

Or perhaps he always paid his Bills on time?
Is it possible that his homes purchases was his only real mistake?

Is Dan Sinclair taking Advatange of the System?
Is Dan Sinclair a BAD PERSON?

Maybe Yes, Maybe No.

But to call him Irresponsible just because he filed for Bankruptcy is very shortsighted.

For teh Sake of Argument, i could argue that Filing for Bankruptcy was a Responsible Solution to his Problem...

Well, i'm obviously about to get FLAMED, but...

Regarding Dan's opinion of being a "low credit risk".
He has a (relevatively) stable Job that he has maintained for several years.
He can Not file for Bankruptcy for another 7 years.
He does Not have any Outstanding debts hanging around (we know this because he just discharged Everything in his Bankruptcy).

There is definitely Truth in his statement.

Perhaps the better Question:
Is Dan Sinclair a BAD PERSON?
Is Dan Sinclair taking Advatange of the System?
In my opinion, the Answer is NO. But this really is a personal Question, isn't it?

We hear about low income and less educated buyers "suckered" into buying a home they couldn't afford, but the Sinclair's are certainly not in this category. Wow, he expects to be able to buy another home after showing he was irresponsible with 2 homes? It's not like he lost his job. He simply bought more of a home than he could afford. I'm glad to see other listeners appalled with the attitude of the Sinclairs.

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