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Victim Mentality

July 30, 2008
By

The Sun‘s front page today is dominated by a photograph of a foreclosure “victim.” Veronica Peterson is about to be thrown out of a home she bought in November 2006 with two loans totaling $545,000.

The story is about the mortgage bailout plan signed this morning by President Bush, but the new rules–which will go into effect in October–are too late to help “hundreds of thousands” of “struggling homeowners” like Peterson, The Sun observes: “The 45-year-old single mother of three and home day care operator couldn’t keep up with her mortgage payments, based on adjustable interest rates of 8 1/4 and 11 1/4 percent.” Her eviction notice coming any day now, Peterson doesn’t “know when I’m going, I don’t know where I’m going,” she told the Sun.

But in the comments section below the article, hundreds of readers pointed out what the Sun‘s reporters and editors could not, apparently: that Peterson had no business in that house, and that she’s lived there for more than a year rent- and mortgage-free. “Where do you think we can get in on this deal?” one commenter, calling himself Henry Bowman, asked another.

The online court and land records show that Peterson closed on the house on Nov. 3, 2006, with two loans from Washington Mutual. The main mortgage, for $436,000, had a starting interest rate of 8.5 percent, adjusting in December of this year to the London Interbank Offered Rate plus 4.99 percent. The second loan, often called a “piggyback,” totaled $109,000 with an interest rate of 11.25 percent, according to The Sun.

Those two payments together would have totaled $3,386.17 per month. That’s before property taxes, upkeep, utilities, etc. Peterson would have to earn at least $50,000 per year just to make her house payments.

But it appears that Peterson made few–if any–payments. The foreclosure was filed July 31, 2007. The balance on the main note then was $435,735.86, plus unpaid interest accrued from Jan. 1, 2007, plus $1,005.72 in late charges. This suggests that Peterson made, at most, one payment on her house: the December, 2006 payment. Given the grace periods typical in home-mortgage business, it is at least as likely that her first payment was not due until January 2007, which would mean she has made zero payments.

Had she made all of her payments, Peterson would have spent about $64,335 so far. Had she rented a similar place, she would have been charged around $2,500 per month–a total of $47,500–since January 2007. Instead, she apparently paid nothing.

“This bill doesn’t do anything for the people who have lost their homes or are in the process of losing their homes,” Peterson said, according to The Sun. “All the laws passed have been basically to help the lending institutions.”

But if Peterson has been living in a $500,000 house (or, let’s be honest, but for the real-estate bubble, it was probably never more than a $350,000 house) rent- and mortgage-free since January 2007, how much of a victim is she? And how much of a villain is Washington Mutual and its bond holders?

The Sun is right about this: There are many thousands of people like Veronica Peterson out there, and thousands of others who are losing not one, but sometimes three or more houses to foreclosure. The Sun and other media outlets should describe them with a word or phrase more accurate than “struggling homeowners.”

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