Magazine article Mortgage Banking

Personal Responsibility

Magazine article Mortgage Banking

Personal Responsibility

Article excerpt

IN 1968, AT THE REPUBLICAN NATIONAL CONVENTION, then-California Governor Ronald Reagan said, "It is time to restore the American precept that each individual is accountable for his actions." I was still a young man at the time, but the concept has been one of my guiding principles as I have grown up, gotten married, raised my family and started several of my own small businesses.

That's not to say there haven't been times when my commitment to this principle was tested. Life has a way of throwing us curve-balls. And the recent economy has made it especially tough for many Americans.

A few years ago, I made the decision to move my family from our home in Kentucky to Pennsylvania, for a business opportunity. I had built a group of commercial office condos with plans to lease them to businesses. Having been in the mortgage business my entire career (and having owned a wholesale mortgage company until 2009), I thought this was the right decision.

As it turned out, however, I was wrong.

It proved more difficult than expected to find commercial tenants, and the property value--as with many property values across the country--dropped, leaving me with an underwater mortgage and a sharply declining financial situation. I was personally carrying the monthly debt load, and draining my savings at an alarming rate. I had no choice but to call my lender and work out a solution. Sound familiar?

Unfortunately, a short sale was in my future. Fortunately, though, my credit was impeccable and I was able to work out the short sale with a five-year unsecured loan to repay the balance of the original debt on the back end.

At the same time, mortgage fraud had been committed on 20 percent of the homes in our new Pennsylvania neighborhood and property values there had now plummeted. Almost immediately, we had lost all the equity we had brought to the closing table when we purchased that home. So when the Pennsylvania business opportunity did not work out and the decision was made to return to Kentucky, we had to write a check at closing. This was a moment of truth for my family--as it has been for other Americans who face these very challenging circumstances.

But we had signed a contract to repay the lender when we first purchased our Pennsylvania house. And we had promised to repay the full amount that was lent to us. There was no clause in the contract that said we would only have to repay the full amount if our house retained its original value. That was not a part of the deal.

Our industry is built on the principle that contracts matter and must be honored by both borrowers and lenders--and not just when home prices are cooperating. So this is what my family did.

We were in a difficult spot financially, but we did not ask for a loan modification, payment assistance or the American taxpayers to bail us out. We did not cry foul. We did what we had to do: We tightened our belts, my wife took a second job and we paid off the entire $38,000 debt we incurred from the short sale of the condos in 10 months.

The decisions to build commercial condos, to relocate to Pennsylvania and then to return back home to Kentucky were mine and my family's. As with all decisions, I knew the potential risks and rewards. These decisions had consequences and I would be responsible for them. …

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