MORTGAGE MELTDOWN / Johnnie Pitts
Beaming with pride and talking a mile a minute, Johnnie Pitts stacked up piles of legal documents on his living room floor the Wednesday before Christmas. The San Francisco Muni driver had just returned from having his signature notarized on agreements that permanently modify his once-exorbitant mortgage to a reasonable interest rate, allowing him to keep the three-bedroom bungalow on Oakland’s MacArthur Boulevard.
At the same time, he boosted his income by racking up overtime – an extra 10-hour day every week – to catch up on some missed mortgage payments and property taxes. “It’s not like I was trying to shirk my responsibility and run,” he said. “My family and co-workers said, ‘Why don’t you just do a short sale?’ but this is my house. This is the major purchase of my life.”
When Pitts bought the run-down house for $429,950 with 100 percent financing in 2005, his interest rate on the larger of his two loans from Chase was fixed at 7.2 percent for two years and then could reset to as high as 10.026 percent. New increases could come every six months. Now Chase has agreed to lock the rate at 6.75 percent for the 28 years remaining on the loan and has made similar modifications to the second mortgage.
Pitts’ monthly mortgage will now be just shy of $2,800. Property taxes and insurance add another $700 a month. The $3,500 monthly total is still quite steep for a man whose base income is about $4,000 a month, although he can earn another $1,000 or so through overtime.
“When it comes to renting, it’s just cash in the trash,” he said. “You can’t win no way when you’re renting, especially if you’re single and in the 35 percent tax bracket. Owning a house is the best thing you can do for yourself. It’s worth it to have some stability.”
Now that the word “modify” has entered his vocabulary, Pitts frequently invokes it. “I’m going to modify my lifestyle,” he said. “I shop at the dollar store; I buy in bulk and on sale. If push comes to shove, I may have to get a roommate.”
It’s true! Just imagine, your landlord raises your rent by 10% – can you negotiate it down?
Can you do the same with a mortgage? Of course!
And that’s the lesson for today folks.