Realty Check
Tough talk on all things housing -- booms, busts, bargains and more -- from "Nightline" correspondent Vicki Mabrey
Vicki Mabrey is a correspondent for "Nightline" based in New York. She covers real estate as well as a range of national stories.
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Leading By Example
April 23, 2009 6:19 PM
Back to Detroit again... where the real estate news remains deplorable. This round is not only deplorable, but shameful as well.
Turns out Detroit city councilman Kwame Kenyatta and his wife walked away from their beautiful home. I won't recount all the details in full here; instead, check out this Associated Press article. I interviewed Kenyatta when that other KK (former Detroit mayor Kwame Kilpatrick) refused to step down, so I wanted to get the story directly from him.
On the phone Tuesday afternoon, he said they had bought the house about four years ago, with an adjustable rate mortgage that had since climbed to nearly 7 percent and was scheduled at the end of 2008 to adjusted upward again. Apparently it had a cap of 11 percent. At the time they abandoned the home they were paying about $2,600 (he said that includes principal and interest, PMI, taxes and insurance), and it was headed up to over $3,000.
Kenyatta said his wife contacted the bank (the house is in her name) before the rate adjusted upward, asking what they could do to bring it down, considering rates now are just south of 5 percent. She says they were told they did not "qualify for any programs," because they were paying their mortgage on time and had not missed any payments. He says they asked about a deed in lieu of foreclosure, and was told they should sell.
Sell? In Detroit? Not for the $225,000 they originally paid, or for the $204,000 he says they still owe. Backing up here a second, he also says theirs is not the only house on the block in foreclosure. Judging from what happened with a nearby home, he said, he knew his would go for less than $100,000 -- if it sold at all.
Still, I couldn't believe that a city councilman, someone elected to serve and care for the city, could walk away from his home, his neighbors, his community. Kenyatta said they weighed their "personal situation," and they were facing rising payments on declining value. When asked what kind of message that sent to his constituents he said, "I stand on my public record which is untarnished. My ability to deal with public funds has never been called into question."
As he's considering a run for mayor, or at least wants to hang on to his council seat, I wonder if the voters in Detroit will see it that way?
April 23, 2009 | Permalink | User Comments (8)
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I don't know what to say about this. I still find it baffling that anyone could go for an adjustable rate mortgage, ever. It just sounds insane to me. Though I admit that financial talk makes my eyes glaze over, I do have common sense. And my common sense tells me that adjustable rate mortgages are a scam. Anyway, Detroit's got so many problems, I'm not sure what the voters will make of Kenyatta's troubles.
Posted by: Lisa Simeone | Apr 24, 2009 7:39:49 AM
Is it any wonder that Detroit is in such deplorable shape given the actions of their city councilmen and women. Do city's really want someone on the city council who is incapable of making sound financial decisions. I think not. If the voter's had any sense in Detroit not only would they denounce Kenyatta as the fool that he is but they should never give him the chance to run for mayor!
Posted by: MiMi | Apr 24, 2009 11:07:43 AM
Sadly, at the very time the citizens of Detroit are trying to survive a mass exodus of people and companies, dismal schools and severely reduced public services one -- and perhaps more than one -- of their city "fathers" seems to lack basic financial and economic savvy.
Posted by: DB | Apr 24, 2009 3:13:33 PM
With the economic situation in all of Michigan in such dire straits it seems the bank is trrying to get every penny it can before people walk away. I wonder how much luck the bank will have selling the house? As for the councilman, he may be able to at least retain his seat with an "I'm in the same boat" campaign.
Posted by: Sloman | Apr 24, 2009 3:27:29 PM
Lots of issues on this one.
First, 7% is a very attractive rate. The difference between 5% and 7% is not all that significant. When I bought my house in 1980, the banks were getting 20% for 30-year fixed mortgages. It seems that people in this country have lost all perspective on where we have been in the past.
Second, taking an adjustable mortgage is stupid. It should be done only by someone who is absolutely sure they can handle the new rates or just pay off the mortgage, when the rates go up (and it is a given that they will). Otherwise, the borrower is just asking for trouble.
Lastly, this turkey's political career should be finished. He obviously has not got any financial savvy and cannot handle the simplest matter--not taking a mortgage he cannot afford. He would be a disaster in managing a government budget. And, he would be just the kind of fool to pass laws that allow junk borrowers and dopey lenders to do the kind of stupid loan writing that has brought the world financial system to the brink of collapse and thereby destroyed our retirement savings and our futures. The innocent have suffered severely at the expense of loser government officials like this turkey.
In summary, we do not need any more financial dummies in government. We already have Nancy Peelousy, Barney-Fife Frank, and Christopher Dudd.
Posted by: Fix government and clean up the country | Apr 25, 2009 12:19:47 AM
Its good to see someone lead by example. CSU northridge are doing stories on the people that form leaders there.
If you want to see leadership in action check out csun leader episode 4, you can watch on you tube. Thank for you time, nice blog.
Posted by: Ben | May 11, 2009 9:43:37 PM
Who are the parties at fault.
The borrower made a bet that rates would not go up (Did not take into consideration the economy would go down) and a conscious decision that if they did he would walk away, I infer this by the very low down payment.
The Bank is also at fault, and I make a hypothesis that in their haste also made the decision to lend with a low down payment on someone who they thought would not walk away from the property.
So, both parties are at fault. Know it seems it would be in banks interest to renegotiate interest and terms rather than having an asset deteriorating and not getting ANY monies. As a borrower would much prefer to work with lender and work out something were both parties win.
Posted by: chale espinosa | May 13, 2009 10:02:46 AM
Sad news on ABC tonight. Seems the government can shame auto ex,s for arriving in D.C. on private jets, they can ruin 70,000 retiries from those auto companies by cutting health and pension benifits but they can turn arround and spent millions on 3 luxury jets for the purpose of transporting members of congress on their little junkits. Just don't see right......
Posted by: Jacque | Aug 5, 2009 7:17:13 PM
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