What can I do about a friend who is victim of sub-prime mortgage situation?

underthecity · Oct 16, 2008

I was good friends with a guy named Craig in grade school and high school. Craig was a really smart guy (always whipped me in chess, for example), but after high school (we graduated in 1989) he got a job at Wal Mart and stayed there. Meanwhile, I went to college, got married, went through different jobs, bought a house, went through more jobs, and make decent money now and have a baby on the way.

Craig stayed living at his parents' house, living in the basement, buying movies, video games, whatever he wanted, I suppose he was happy. He dated sometimes, but things never went anywhere. I didn't actually talk to him all that often while I was in college. Well, one time in the 90s he went to Utah to find his birth mother and hoped to maybe start a new life there. Things "didn't work out" (never went into detail) and he moved back home, went back to Wal Mart.

After the 2000s and we bought our house, I more or less lost touch with him until the last couple of years or so when he started calling again. By this time, I had pretty much moved on. He wasn't a close friend anymore (I'm horrible to say this, I know) and we had nothing in common any longer. But we still talked, he visited a couple of times. He still worked at Wal Mart and told me he made $12 an hour working about 39 hours a week, his schedule was opposite mine.

Getting to the point soon.

He's 40 now. A few months ago he called and excitedly told me that this girl we went to high school with started working at Wal Mart. They met, started dating, and suddenly decided to move in together. She's divorced and has three kids. They decided to buy a house together that cost I belive $140K. (We paid $104K for ours, and I know how much mortgages cost every month.) How were they going to afford this? I wondered. They both work at Wal Mart. They'll be on food stamps. Assuming she has child support and actually gets it timely, it's still going to be really tough.

But this was none of my business. And he is kind of an estranged friend. What would I tell him? Don't do it?

He told me his father said they would not support him morally or financially. Fine, he told them and moved out. They bought their house.

I was thinking this could only lead to disaster.

Today I got a very long message on the voice mail from him. It seems he can't pay his bills, they don't have money for mortgage, all their latest checks are bouncing, their credit cards have been cancelled, and I fear they're going to lose their house. He asked if I could lend him $100 if I could afford it.

We can afford it, but it's only a temporary band aid. Craig is obviously a victim of the sub-prime mortgage fiasco about which the shit has hit the fan, as we are all aware. He's the first person I know who is likely being foreclosed on, now just one of the statistics.

What do I do? I can't afford to continuously loan him money, and neither will he want a lecture. He mentioned he's afraid to talk to his parents because he knows they're going to yell at him; and they probably will.

Advice?

Sheryl Nantus · Oct 16, 2008

If you can afford to lose the $100, I'd give it to him and say "No more". It's one thing to give a bit of cash that you can afford to spend to help out buying food and the like (when there's kids involved) but that's got to be it.

He obviously never grew up and jumped at this "dream" chance to get all that he wanted in one fell swoop. Now the bills are there and you can't pay them all off for him unless you win the lottery.

Tell him to grovel back to his parents. If he's too proud to do that then offer the listings for the nearest food banks. And be prepared for the woman to leave him as well; she may want to do what's best for the kids and not for their relationship.

But don't get suckered into thinking you can help him out of this. He's an adult and got into it with eyes wide shut. Unless you want to adopt him the best advice you can give him is to move back home and start paying off those debts. Like an adult.

IMO, of course.

WendyNYC · Oct 16, 2008

If you don't wish to give him a *gift* of money, don't start. Just tell him things are tight for you right now. Maybe refer him to a legal aid society in your area? I'm not sure that would help, frankly.

Priene · Oct 16, 2008

underthecity said:
Advice?

Firstly, you're not loaning him anything. You're giving it to him. He's about to have a debt of ten of thousands of dollars and you'll be way down on the list of creditors.

Secondly, he's going to have to grow up. He's forty but still scared about being shouted by his parents? I hate to be pejorative, but that's pathetic. They're an option to be explored. We have Citizens' Advice Bureaux in the UK. If there's a local equivalent, tell him to get down there tomorrow. Talking to the mortgage company is an absolute necessity. It's not necessarily in their interest to turf out defaulters when there's a chance they might be able to pay something.

In the end, though, it might come down to handing back the keys and ending with a mountain of debt. That's what housing crises do to people.

Yeshanu · Oct 16, 2008

underthecity said:
Craig is obviously a victim of the sub-prime mortgage fiasco about which the shit has hit the fan, as we are all aware.

...

What do I do? I can't afford to continuously loan him money, and neither will he want a lecture. He mentioned he's afraid to talk to his parents because he knows they're going to yell at him; and they probably will.

Advice?

Craig isn't a victim of the sub-prime mortgage fiasco so much as he's a victim of his own lack of willingness to grow up. Lending him (or giving him, as someone pointed out) $100 won't help him at all, in the long run.

Tell him that you don't lend money to friends. If you feel sufficiently moved, I wouldn't talk you out of giving him the money, if you're so inclined. I've done such a thing myself, and others have done for me. But tell him it's a gift. Tell him it's the last gift, and advise that he seek credit counselling from a non-profit agency ASAP. They can often deal with creditors and help him learn better money handling skills.

Been there, on both sides...

crashbam · Oct 16, 2008

Your friend needs to walk away from the house. He can't afford, never could afford it and it's only going to get worse. Don't lend him the money--you'd be better off burning it, sorry to say. $100 is not going to help this situation.

If he's in the United States, he should contact his local bar association and try to find a probono lawyer (ie. one who will work for free). The banks have a lot of these situations right now, more than they can handle. They may be willing to negotiate with him, either by doing a short sale (selling to someone else for less than he owes on the mortgage), or a deed in lieu of foreclosure (whereby he gives the bank the house and they negotiate about how any shortfall will be handled. Many banks are giving up on shortfall liability and I think in some states the borrower can not be held liable for any shortfall).

He might consider filing for bankrupcty too--he sounds like a good candidate.

He and his girlfriend and her kids will need to find a place to live. If they stop paying the mortgage, they might be able to afford rent, although a savvy landlord would do a credit check. If they have problems, then he needs to be man and ask his parents for help. His parents might hurt his feelings (*sob) but he needs to suck it up and do what he needs to do to protect these kids. He is 40, time to grow up and be an adult. And tell him to get some ambition too--time to reach a little higher than Wal-Mart, especially since other people are depending on him and they're not getting by. Or get a second, maybe even a third job.

underthecity · Oct 16, 2008

Thanks for the advice. I agree with everyone's points. He never really grew up and never had the motivation to go to college and do something with his life.

At one time in the past, he tried a credit counselling company (Christian Credit Counselling or something like that with "Christian" in the title so you know that God was on their side <rolls eyes>) and ended up in more financial trouble than before.

allen

Pagey's_Girl · Oct 16, 2008

He needs to talk to his mortgage holder ASAP to see what his options are. They might be willing to work with him to either come up with either a different payment plan or something like a short sale, where they agree to take whatever they can get and forgive the rest. Like Priene said, a foreclosure isn't really in the lenders' best interests, either. He might also have to face the fact that a house isn't in the picture for them right now, take what he can get for the house and find an apartment until they have their finances built back up.

I wish I had some better advice.

Honalo · Oct 16, 2008

How many friends does he have in the area - could you have been one among many asked for $100 handouts? If he's that strapped $100 will, what, buy groceries and some gas? Methinks he might have been doing a tally to see how much he could get, but I am admittedly cynical.

He won't learn if people bail him out. The sad part is, from what you're describing, there doesn't seem to be a flash of brilliance here - anything that would indicate that he would change his life around if he could. If Wal Mart is his aptitude, that's great - but if Wal Mart is a refuge because he's afraid to really go out and live his life, nothing you can do - no loan of money - will help.

My advice: If you're strapped for money yourself, especially with a baby on the way, use it on your own bills. If Craig had been a close friend - maybe, but because he's not I say you owe him nothing.

Credit and mortgage counseling and if that brings no recourse, then bankruptcy and walk away from it, hopefully with a lesson learned.

maestrowork · Oct 16, 2008

underthecity said:
We can afford it, but it's only a temporary band aid. Craig is obviously a victim of the sub-prime mortgage fiasco about which the shit has hit the fan, as we are all aware. He's the first person I know who is likely being foreclosed on, now just one of the statistics.

First of all, I hate to say it, but he's not a "victim." He knows he can't afford it. He and his girlfriend are both on food stamps and they bought a $140K house? Dude, my first house cost $80,000 and I made $55,000 back then. I lived within my means. I think that's the problem with people -- they can't afford something but they keep buying on credit, without any real plans to ever paying it back. They need to grow up.

I agree with Wendy. Don't start, even if you have $100 to spare. You're not even a close friend, and soon he will come back for more. Tell him to ask for help -- the REAL help. Professional help. No need to lecture either -- he should learn that by himself. He's almost 40 years old.

Unfortunately, it's very likely his house would be foreclosed, and there's nothing you can do about it. Like everyone else, they'll just have to learn the lesson and move on, and the bank would probably take a loss. Nobody wins here, but your friend is not the victim here.

underthecity · Oct 16, 2008

Again, I agree with all of your assessments about his character and haven't talked to him yet today. If history is any indication, he will call at the most awkward time tonight.

I did forget to mention that a couple of months ago he left Wal Mart and works now at a local amazon warehouse. My guess is that he makes about the same money.

The reason I said he was a "victim" of the sub-prime mortgage thing was because he was one of those people who couldn't afford a house but the lending institution gave him a loan anyway. The whole system crashed because of it. If the banks weren't so obsessed with the sub-prime mortgages, he never would have qualified for a loan. But he and tens of thousands just like him did it anyway.

I do realize that giving him $100 won't help him much, if at all. It's like taking a cup of water out of the ocean in order to drain it.

allen

WendyNYC · Oct 16, 2008

I'm guessing he ran up a lot of credit card debt, too?

I agree that he should think about filing for bankruptcy.

Grrarrgh · Oct 16, 2008

underthecity said:
Again, I agree with all of your assessments about his character and haven't talked to him yet today. If history is any indication, he will call at the most awkward time tonight.

I did forget to mention that a couple of months ago he left Wal Mart and works now at a local amazon warehouse. My guess is that he makes about the same money.

The reason I said he was a "victim" of the sub-prime mortgage thing was because he was one of those people who couldn't afford a house but the lending institution gave him a loan anyway. The whole system crashed because of it. If the banks weren't so obsessed with the sub-prime mortgages, he never would have qualified for a loan. But he and tens of thousands just like him did it anyway.

I do realize that giving him $100 won't help him much, if at all. It's like taking a cup of water out of the ocean in order to drain it.

allen

Not to overstep my bounds, but based on your location, I think he works in the same place as my brother. And if what I've seen going on with him is any indication of your friend's predicament, it's not going to be getting any better any time soon. I think everyone is right, if you decide to give him $100, you have to look at it as a gift and not a loan. Although if he's in that much trouble, I can't imagine what $100 will do for them. What about the girlfriend's family - are they around to help out? If I were Craig and his girlfriend and I needed help that badly, I'd be more inclined to start there. I'd think that since there are kids involved, her family would want to help out if they could. Craig's in way over his head and he and the girlfriend need to just figure out the best way to take the hit and take it.

Ol' Fashioned Girl · Oct 16, 2008

If he's only asking for $100, he's likely not using it to get himself out of trouble. And you mention this is his second time at bat - going through this and going through credit counseling before. My alarm bells are ringing loudly in Morse Code: Mooch! I wouldn't give him a dime... but I'm mean and very leery. If you decide to help him, do not give him money. Buy food and drop it off.

maestrowork · Oct 16, 2008

Ol' Fashioned Girl said:
Buy food and drop it off.

Good idea. I help out a local guy from time to time -- he has three young daughters (we call them "the girls") and he's living from paycheck to paycheck. He just got a Section 8 apartment -- which was a huge relief. I don't usually give him money directly, but if he needs stuff, I'll get him the food, diapers, formulas, etc. I just want to make sure he's getting the right help and not enabling.

Snowstorm · Oct 16, 2008

There may be other options. No knowing how deep in debt they are, can each adult take a second job? Lots of credit card debt? I assuming they have lots of "toys". Sell them. How many cars? Have only two (if they have kids that can drive, they can use mom and stepdad's). Can they walk/ride bikes to work to save gas? Lose satellite TV/Cable? They should scrub every bill they have, electric/gas, etc. and find ways to lower them. Every little bit helps and having something positive to focus on might make them all feel better and give the kids a better financial lesson.

Seeking the help of Consumer Credit Counseling Service and/or financial counselor might give them more ideas.

dpaterso · Oct 16, 2008

Me, I'd gift him the 100 and explain this can't be a regular thing, I've got family to take care of and my own bills and mortgage to pay.

-Derek

euclid · Oct 16, 2008

Walk away. Don't answer the phone. It's really not your problem.

underthecity · Oct 17, 2008

euclid said:
Walk away. Don't answer the phone. It's really not your problem.

Agreed; however, this is how I've been handling it up until now. I haven't been returning his calls. But I am an old friend, and it's time we talked about this.

James81 · Oct 17, 2008

Craig is obviously a victim of the sub-prime mortgage fiasco

No, he's not. He's a victim of the "Man, I am really shitty with my finances and got myself into my OWN mess" fiasco.

But if I were you, and I had the money (meaning it won't effect you in the least to give it to him), I would just give it to him. $100, a ONE TIME DEAL, with no conditions on having to pay it back. Don't lend it to him, just give it to him. And when you do, make it very clear that this is a ONE TIME thing. And with the money, buy him a copy of Dave Ramsy's "The Total Money Makeover" or "Financial Peace" either on CD or a book (if he reads).

Then wash your hands of the situation.

Yeshanu · Oct 17, 2008

Another thought here: If you do decide to give him money, or food, you might also decide to give him a book. No lecture, but I do agree that the guy has to grow up and face reality. You might ask why he wants $100, as well. It's a really small amount, given his situation. Is he asking for it for a specific purpose (in which case you can directly give him the food or whatever it is he needs) or is he just trying to get a small amount out of a number of friends in lieu of actually doing something constructive about his situation?

I hear what you're saying about the banks, and they'll get what they deserve in the form of millions (billions?) of dollars that can't be recouped. But it takes two to tango, and the people who borrowed when they couldn't afford it are at least partly to blame. Ditto with the "bloodsucking" credit card companies--they don't lend you money if you don't ask for it first.

My brother just lost his house, not because he couldn't afford to pay the mortgage, but because he preferred $600 snowboards over paying for the house. Giving the guy more money, even on a regular basis, wouldn't help the situation, because it's basically an attitude problem: I deserve to have everything in life, even though I don't make enough money to have it.

Bubastes · Oct 17, 2008

Don't give him the money. It sounds like he's trolling for suckers.

I made the mistake of trying to help a friend several years back by giving her money and Dave Ramsey's book (she's religious, so I figured his message would have a better shot of reaching her). Well, she and her husband are still over 100K in debt and refuse to sell any of their three cars (one of them a classic car), the dune buggy, or the camper. They bought their son a Wii two weeks ago and a big screen TV last week.

She also said that one of her two dogs (purebred, of course, just like her two cats) chewed up the book.

Yeshanu · Oct 17, 2008

*shakes head*

You can only try, Meowgirl. Some people simply refuse to learn.

But some people do learn, and often it's the help of an angel that starts the process. So my motto is try, at least once. But don't obsess about it. You can't save them, they can only save themselves, and if the helping hand you extend doesn't do the trick, then leave it in God's hands (or the hands of the universe) and move on. That's what I've done in the past. I've helped some people, and been unable to help others, and I've learned (I hope) that when others help me I should take it as a sign that I should learn to do for myself, as well.

maestrowork · Oct 17, 2008

Some people learn by examples, or by rubbing off of someone. Allen, the best thing you can do is to be an example to him -- how you manage to live within your means and still buy a house and have a financial plan for your family and you future, including a new addition in just a few months. Certainly, he can only get help (real help, and not handouts) when he wants to get help, but I think little by little, your example may make him think a bit more about what it means to be fiscally responsible.

James81 · Oct 17, 2008

MeowGirl said:
Don't give him the money. It sounds like he's trolling for suckers.

I made the mistake of trying to help a friend several years back by giving her money and Dave Ramsey's book (she's religious, so I figured his message would have a better shot of reaching her). Well, she and her husband are still over 100K in debt and refuse to sell any of their three cars (one of them a classic car), the dune buggy, or the camper. They bought their son a Wii two weeks ago and a big screen TV last week.

She also said that one of her two dogs (purebred, of course, just like her two cats) chewed up the book.

See, a person should help someone to help them. Not to try to reform them. Not to try and control the outcome just cause you ponied up some cash.

His role her is merely that of the Good Samaritan. Nothing more. Nothing less. Even if the person never learns, you have the satisfaction of knowing that you gave without pre-conditions and that you gave from a sense of genuinely helping another human being.

Change is not a requisite of giving. If you can't give without desire to control the outcome then you just simply shouldn't give. Period.

What can I do about a friend who is victim of sub-prime mortgage situation?

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