Ninety-one year old Seattle woman’s mortgage mess as detailed by the NY Times.
“……That was the case for Gertrude Robertson, a 91-year-old widow and nurse’s aide living in Seattle who took out an adjustable-rate mortgage of $450,000 in January. Even at her age, Mrs. Robertson was earning $3,500 a month, largely by caring for another elderly woman. Then the woman died. Mrs. Robertson’s income was reduced to her monthly Social Security payment of $1,500. Meanwhile, her loan ballooned to $475,000. Unable to make the payments, Mrs. Robertson is listing her home for $510,000.”
Mrs. Robertson’s pre-payment penalty was $14,400.00. We have seen pre-payment penalties slightly higher than this paid out through our escrow office. I think there are many cases where consumers really don’t understand what they are signing. My wife Lynlee and I argued about this pretty robustly this morning. Lynlee contends that people should know what they are signing and if they are uncomfortable for any reason, they should not sign or at least consult an attorney or other party to help them understand the documents. She argues that if people get in trouble with loans they should not blame the loan officers or anyone else but themselves.
I don’t think Lynlee and I will agree on this issue. I think she is very naiive about why pre-payment penalties were so widely used. I think there are a lot more pressures to consumers and it leads them to make decisions that are not necessarily wise. How many Gertrude’s are out there? Thousands.
Update : the New York Times Article was available through the link earlier this morning, but as of 9:50am it has been archived and you have to log-in to access it. Sorry about that.