Making Do: The McCoys’ Housing Dilemma

The economy continues to weaken and Moody’s credit rating company reports nearly 10 million homeowners are having trouble making their mortgage payments. People who track the housing industry say another wave of foreclosures is on its way. All the while, some homeowners are treading water, trying to stay afloat. WBHM’s Tanya Ott has one Hoover family’s story.

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 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.

“And about 3 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.

“We’re not unaccustomed to doing things the heard way, but we thought we could take a little bit a breather at this point… but… there’s not a lot of oxygen out there!”

(Tanya) “It’s pretty stressful. I can see it in your face.”

“Uh, 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, you know, where do you squeeze the balloon to get the result you need. The money you need to solve the problem.”

The balloon that popped is college. The McCoys had to take out a student loan their oldest son. Another son is taking a year off, because he can’t afford the tuition. And their daughter, Summer, graduates high school in May.

“They’re gonna 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 at 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.

“The whole thing fell apart and they lost the investment property as well as the primary residence. And 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.

“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 jeesh, they’re talking about it! You’ve got some people, their way to handle finances, they just choose to ignore everything. If you haven’t reached out, there’s no shame in it. There’s a lot of people 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. So, they’re looking to Washington for relief.

Earlier this month, the House of Representatives passed a bill that would allow bankruptcy judges to rewrite the terms of failing mortgages. Judges could lower a homeowner’s interest rate or slash the principle loan amount. The bill currently faces opposition in the Senate.

~ Tanya Ott, March 24, 2009.