Down the Up Escalator (16 page)

I asked Susana if it had felt different to negotiate with Ocwen once she had the judge’s decision behind her. I expected her to crow about how fiercely she bargained once she had a rock for her slingshot. But instead her whole body seemed to sigh.

“I couldn’t do it,” she said apologetically. “I couldn’t start the telephone calls. I couldn’t start with the ombudsman’s office.” She appealed for my understanding. “I was seriously considering bankruptcy. I was ready to have a nervous breakdown. Emotionally, I couldn’t talk to Ocwen again. I just couldn’t. I wanted someone to do it for me.

“So this last time I did some research on loan modification companies.” She must have seen my dismay. The newspapers were full of stories about crooked and useless modification schemes, and I would soon meet people who fell for them.

“My friend who’s a realtor said, ‘Don’t do it, don’t pay anyone.’ But no one is walking around in your shoes. I did good research, and I found a company called Amerihope. They have a Web site. I paid them $1,200 in installments.

“They told me that Ocwen was getting ready to foreclose again
in court. I guess they had gotten it together, got their papers correct. I would have had to show up myself; I would have had to retain a lawyer for a lot more money than $1,200. These people went in, and they got me the last agreement, which I am getting ready now to make the third payment on. I got a letter in the mail saying that the charges against me, against the house and what not, they’ve been dropped.” Late fees and other charges connected with mortgage delinquencies can be flabbergasting. “I have the letter upstairs on my printer. And that’s how the last agreement happened.

“And now that I have respectable, steady money coming in from three roomers and I had the money from the pension for a new down payment, I could make a payment plan that I can keep.”

Susana’s new monthly payment of $2,900 is actually higher than some earlier negotiated payments, but it’s doable as long as she keeps collecting rent from the three single adult roomers that her friend in real estate helped her find. But the recession was dragging on. What if one of them loses a job? I wondered. Where would Susana find another miraculous cache of capital after borrowing the maximum from her pension? And how will she ever be able to retire?

Susana and Samuel saw me out.

“It’s too gorgeous,” I said, breathing the air on Decatur Street. “It’s going to be gentrified.”

“Hey, they’re jogging with dogs already,” Susana responded. “I stood here this spring with my next-door neighbor—he’s been here like forever—and we saw them jogging with these little dogs, it’s like, ‘The pit bulls are going and the poodles are coming in.’ I’ve said to Samuel, someday he’ll be able to demand a million for this house.”

“So his only way to enjoy the house may be to sell it?” I suggested.

“We’re disputing with that now. I’m getting tired of the cold weather. But we’re not sure the neighborhood is gonna change quickly enough. I tell Samuel if he
does
get into those unions [Samuel was up for an apprenticeship program] and he’s making the money, then I’ll go get a little place somewhere where it’s warm and then come back and forth and maybe he’ll have a family and maybe not.

“But it’s gotten so shabby.” She turned to look at the house. “The staircases need carpets, I want to redo the outside. Not with that stuff they used across the street.” She points to a house with modern siding. “My dream is one of these days I’ll be able to restore it to the way it was. Like on
This Old House
, the one they did on Sterling Place”—a Brooklyn town house that had had a televised restoration.

“Anybody who knows me knows two things,” Susana said, summing up. “They know Samuel, and they know this house. That’s my life.”

“It’s gorgeous,” says Samuel.

“And we love it,” says his mother.

The tiny black woman sweeps her arm back toward the Brooklyn town house and says, only half joking, “This is my Tara, and I swear I’ll never be hungry again.”

Susana Elsemeer and I are small, wisecracking, middle-aged women with almost the same Brooklyn accents. We were both single parents, and we both spent our prime years managing the family’s finances alone. The big difference between our two financial systems was savings—or capital.

Before my daughter was born, I had put away about $30,000 from a play I wrote. It was easy to save since I earned the money all at once. My system from then on was to put all my book advances (also earned all at once) in the bank and spend them as slowly as possible. I never had much more than $30,000 during my single years, but I was always
ahead of the game
.

When my daughter broke a tooth, I paid cash; when Susana’s house broke a water main, she borrowed. That meant that the $6,000 repair cost her $10,000 or $12,000 or more as she paid it off. Meanwhile, she had that much less equity in the house.

Susana borrowed on her parents’ house in order first to buy and then to maintain it. Then she borrowed from her pension (and not for the first time) in order to put enough cash back into the house to get a mortgage payment she could afford. She’s already hollowed out her two most obvious sources of savings, her house and her pension. How will Susana ever get
ahead of the game
?

What about saving out of her wages?

Even cheap as I am, I’m not sure I could have come up with a budget that would have allowed a school secretary to set aside enough cash to cover a mortgage of close to $3,000 a month in so deep a recession.

Susana had deliberately rented through a foreign school so she wouldn’t be dependent upon more economically insecure local renters, she’d told me. Though that is what she has now. But she considers them stable since her friend the realtor helped her to find them. Susana herself never mentioned being black or living in a black neighborhood as an economic problem. Still, she’d “diversified” in a manner that would leave her less vulnerable to black or even U.S. unemployment. But she hadn’t prepared for a global recession.

When it came, the Elsemeer finances were precarious enough
that despite a good union job (formerly known as a regular job) it took two miracles—a windfall of time plus a windfall of credit—for this single earner to save her house. But save it she did. And though she’s fallen behind a time or two since, she will keep it, I’m sure.

I was still hoping to find someone who got his house free and clear because the bank couldn’t produce all the pieces of the sliced-and-diced mortgage. Frankly, I was a little disappointed that Susana hadn’t used Judge Schack’s decision to say, “Show me the mortgage—or at least, give me a lower interest rate.” But in fact, I had just seen the happiest housing outcome I ever would.

I wish I’d taken a picture of Susana and Samuel Elsemeer waving from their town house steps. Judge Schack would love to see it. By the way, they asked me to convey their profound gratitude.

With This Debt I Do Thee Wed

A woman I know was worried about a relative with large student loans. I arranged to phone the young man in Minneapolis. Actually, he did the calling over his Skype, and though I had no video camera myself, I answered his ring and suddenly beheld the head and shoulders of a moonfaced man in his thirties with a modest and appealing smile.

Karsten Lind teaches theater in a private high school; his wife teaches music. Together they earn about $100,000 a year, and they enjoy what they do. They must be good at it too, because neither of them has been out of work during the course of this recession. To make life even sweeter, they have a toddler that they both adore.

In the 1990s, Karsten did just what young people were encouraged to do: he “invested in himself.” In the course of four years of undergraduate and one year of grad school, he amassed a BA, an MFA, and $85,000 in student loans.

But he’d paid that down to $45,000 during his first teaching job. It was at a boarding school where he had virtually no living
expenses. Soon his teaching salary went up, but he had household expenses and dropped his student loan payments down to $500 a month. At that rate they’ll be paid off in seventeen years.

It irks Karsten when he’s visited by friends from other countries who graduate debt-free and can take a year off to explore the world. It also bothers him that while the Fed keeps interest rates low, he still pays 8.25 percent on his loan. “I’m basically paying twice as much as current students for a product that is guaranteed by the government. What a deal for the banks.” Unlike most other loans, student loans are not allowed to be refinanced and can’t be discharged in bankruptcy. “Think if you could lend your money out at 8.25 percent and know that unless the U.S. government goes bankrupt, you’re not going to lose a thing.”

A few years earlier Congress considered legislation that would allow student loans to be refinanced like mortgage and other loans, without losing their government guarantees. The proposal was lobbied away by lenders. So student borrowers of Karsten’s vintage were paying up to 8.5 percent while banks got their funds at less than .5 percent. I can see why that annoys him.

Still, $500 a month on a $50,000-a-year job might be regarded as a modest agent’s fee. How sad to think of one’s education in such a mercenary way. Still, to me, Karsten’s debt seemed manageable.

Then he happened to mention something about his house in Washington, D.C. “Wait, aren’t you calling from Minneapolis?”

That’s when I learned that the couple had done something else normal for young families. Once they were “occupationally settled,” Karsten and Anita bought a house.

“We were both teaching in D.C. private schools in June 2006. We were both making somewhere in the fifties at that point, so a little over $100,000 combined. But we had no idea what we
could afford. So before we started house hunting, we went to Countrywide—one of those big loan companies that caused all these problems.

“The mortgage broker took down our information, went through all their rigmarole, and said we could borrow $475,000. Which, I mean, in retrospect, it’s preposterous.

“We didn’t have a real estate agent at the time, so the mortgage broker said, ‘Oh, I have a really close friend who is a great agent. Let me give her your name.” (In many ways Karsten is as innocent as his appealing smile.) “The agent took us around the Washington area and did not show us a single house under $400,000.

“We told her that we wanted to pay $250,000, and she showed us one that was $399,000. But it got into a bidding war and sold for $426,000. Basically, she just wanted to show us that $400,000 was a normal price.

“Anyway, I found a listing myself online just outside of the city. It was listed at 299. I went myself, I looked around and called Anita and I said, ‘I think we should get it inspected and put in an offer.’ One of the things the realtor didn’t like about that house was that they were only offering 1.5 percent commission to the buying agent. She basically refused to write a contract unless we upped that to 2.5 percent, which is why we bought a $299,000 house for $301,500.

“So basically we bought a house for $300,000 that had sold ten years earlier for $45,000 and was in need of a lot of work.”

Over the next five years Karsten and Anita put in the work, paint, lumber, and love that made them happy with their house. But they began to be unhappy with their jobs. And when their daughter was born, they realized that they’d rather raise their child somewhere else.

“We saw when we started job hunting that it was pretty much impossible for two performing arts teachers to find work at the same time in the same city.” But when Anita got a permanent job in Minneapolis and Karsten was offered a one-year sabbatical replacement spot, “We committed to coming to Minneapolis and went to put the house on the market.”

That’s when they grasped what had been going on in the outside world while they were busy teaching and starting a family.

“We had an agent over; he was actually the selling agent when we bought the house. He came, looked at all the upgrades we made, and said, ‘There’s no chance you’re going to get more than $200, 000 for this.’

“Funny thing,” Karsten observed, “the Washington area didn’t get hit that hard in the crash. There are parts of Montgomery and Fairfax Counties that are now back above their 2006 high. But we had bought in a transitional neighborhood. It’s a really nice block with lovely neighbors and an organic co-op. But once a year there was a shooting on a block behind our house.”

“It didn’t transition fast enough?” I asked.

“It took a dive. Look it up if you like. The zip code is____. In the six months before we went to sell, not a single house in that zip code had sold that wasn’t either a foreclosure or a short sale.” In a short sale you sell a house for below the mortgage debt with the bank’s agreement that it will accept the sum you get as full payment. Short sales are notoriously difficult to negotiate with banks.

At that moment the Linds had a buyer who’d agreed to pay $115,000 for the house, but his commitment ran out in three weeks. They were waiting for approval from two banks that jointly held the mortgages. They had tentative approval from one.

“While we’re waiting, we’re paying mortgage, utilities, insurance,
taxes in D.C., which comes to $3,000, and $1,100 rent in Minneapolis and going further into debt each month.”

“Who’s lending you all that money?” I asked.

“Credit cards,” he answered.

“Oh,” I said.

Karsten’s expression acknowledged the dubiousness of that recourse. The couple already had $30,000 in credit card debt. “Twelve or 13 percent, I think,” Karsten said in answer to my query about his interest rate. He called off camera to confirm those numbers with his wife. But no matter how high the interest it was imperative, they felt, that they keep paying on the D.C. house.

“Our lawyer says this short sale, by itself, will knock about 100 points off our credit scores—between 100 and 150. If you also don’t pay your mortgage during the six months leading up to your short sale, that knocks another 200 points off your credit. So if we stopped paying our mortgage, we’d be looking at a 300-point ding in our credit, which would decimate our chance of ever getting another mortgage. So we’re doing our best to keep paying till our short sale is approved, and we’ll only take about a 100-point ding.”