I got really puzzled with their second story. (The one about a couple that bought a 2-story house for $445k in National City in 2002) 445k sounded insanely high for 2002 in National City. Besides, if they bought in 445k, why couldn’t they sell or refinance? The house should be worth at least 600k now.
So I did some digging and I found this:
1018 D Ave, National City, CA 91950
3 beds, 1.0 baths, 1,395 sq ft
Built in 1935
In 2002, it was worth 200-250k. But it wasn’t bought in 2002. It was bought in September 2004. Right now it is supposedly worth around 450k. The house is listed on Yahoo Real Estate as a REO with asking price 351k.
So here’s what the story looks like. An elderly couple saves some money by “many years, sacrificing, working two and three jobs” and buys a 70-year-old 3br shack in a poor neighborhood for close to half a million dollars. With no money down. Judging by the monthly payment ($2045/month), financing is either 5.5% interest-only or ARM with “teaser” rate of around 3.7%. The former is more likely (or else how do you explain their shock about the rate increase?)
Soon it turns out that they can’t afford to pay even that. At this point their house is about $100k up in price. Do they sell it? No, instead there comes an absolutely incredible refinance story from which they emerge holding an ARM, with full realization that they won’t be able to pay once it resets. ARM resets, they go into default without even an attempt to sell the house.
I’d call it extreme financial cluelessness, but we’re told that the lady owns two restaurants? This is beyond bizarre, this is Twilight Zone material.