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Falling into triple mortgage trouble

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Tess Vigeland: This week as fallout from the financial crisis continued Congress approved the release of the second half of the bank bailout. The incoming Obama administration says $50 [billion] to $100 billion of that will go toward reducing foreclosures.

Moody’s reports nearly 10 million homeowners are having trouble making their mortgage payments.
For some of them it’s because of an untenable adjustable rate mortgage. For some it’s a job loss that makes it impossible to keep up with those payments. And for others it’s not just one mortgage that’s the problem.

Tanya Ott reports from Birmingham, Alabama.

Tanya Ott: This is not a story about people who speculated in real estate and ended up in mortgage trouble. Kitty McCoy and her husband followed the American script. They got married and bought a little house. They had a couple of kids and bought a bigger house, but held onto the little house thinking it would eventually help pay for their kids’ college. But the McCoys story takes a turn when, in 2006, Mr. McCoy took a job in Alabama. They put their Florida house on the market and got an offer.

Kitty McCoy: And about three days before the closing for the sale of our house in Florida, the buyer had a heart attack.

The sale fell through. Florida’s housing market crashed and the McCoys found themselves with three homes — the two in Florida and a new one in Birmingham. They tried selling the Florida properties, but after more than a year on the market, they settled on renting them, for less than the mortgage payment. So now they’re in negative cash flow. Triple mortgage trouble.

McCoy: We’re not unaccustomed to doing things the hard way, but we thought maybe we could take a little bit of a breather at this point and — not a lot of oxygen out there!

Ott: It’s pretty stressful. I can see it in your face.

McCoy: Oh, well. It’s really hard to watch my husband with it. He struggles as wanting to be the provider that I think men envision themselves to be and wanting to solve all the problems and take care of it. And you know, just, every month there’s something that you didn’t plan for, you didn’t see on the horizon that comes up and it’s like, where do you squeeze the balloon to get the money you need to solve the problem?

The balloon that popped is college. The McCoys had to take out a student loan for their oldest son. Another son is deferring college for a year because they can’t afford it. And their daughter, Summer, graduates high school in May.

Summer McCoy: They’re going to do whatever they can to help me. They’re not going to throw me out the door with my bags packed and go ‘see ya’. But I don’t want to put them in the position that they feel like they have to do everything.

Summer McCoy says she’s really nervous. She’s been accepted to the University of Alabama, but her part-time job at a movie theatre isn’t enough to pay the tuition.

There’s no telling how many families are in this situation. No one keeps those numbers. But University of Alabama at Birmingham real estate expert Stephanie Rauterkus has been pouring over foreclosure records. She sees a trend: the average number of mortgages per consumer has almost doubled in the last 15 years. She says in many cases, multiple mortgages means big trouble.

Stephanie Rauterkus: The whole thing fell apart and they lost the investment property as well as the primary residence. So, so it’s, it’s unfortunate.

Unfortunate, and unhealthy. Financial planner and life coach Brady Stamps says he knows some homeowners who are so stressed out they’ve developed high blood pressure, depression and other medical problems.

Brady Stamps: Any time you have this emotional situation where everywhere you turn your friends are talking about it, the TV’s talking about it, you try to watch a movie or comedy to get relief and jeez, they’re talking about it! You’ve got some people, their way to handle finance is they just choose to ignore everything.

Brady Stamps says reach out.

Stamps: There’s no shame in it. There’s a lot of people that are in similar situation.

The McCoys have looked at refinancing their mortgages. They keep hearing about the historic low rates right now. But their debt-to-income ratio is too high so they don’t qualify, even though they say they’ve always had good credit and they make their payments on time. The McCoys are looking to Washington for relief. Congress hopes to pass the hotly debated economic stimulus bill next month that helps fend off foreclosures.

In Birmingham, Ala. I’m Tanya Ott for Marketplace Money.

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