Some homeowners struggle to make their monthly payments

By Belton White
Edited Melanie Byer
Posted March 4, 2009

When Stacey Sigafoos moved to Lexington County from southern Virginia in  2006, she had no job but somehow qualified for a $268,000 home loan.

She ultimately decided it was too much and instead chose two adjustable-rate mortgages totaling $136,500, with no down payment, to buy her three-bedroom, two-bath home in the Aberdeen Farms subdivision.

"At first, it was hard for them to find something, like a regular 30-year, fixed-rate loan, because I did not have any work," she said. "So he [the mortgage broker] said ‘Well, there's one other option, but don't worry; you can refinance.'"

Sigafoos now works as a waitress. Her loans, one at 9 percent and 12.5 percent interest, have not adjusted upward -- yet. But she can't refinance, and she's struggling to keep her home, as are millions of other Americans.

Because adjustable-rate mortgage qualifications were more lenient than conventional mortgages two years ago, many people like Sigafoos with adjustable rates don't qualify or can't afford refinancing to a fixed rate. And as property values drop, fewer people are can sell their homes without financial loss.

Sigafoos pays a total of $1,154 a month, from child support and the money she makes waiting tables to Aurora Loan Services, a subsidiary of Lehman Brothers Bank. A year ago, however, Sigafoos could no longer afford her monthly payments, and in December she filed for bankruptcy to prevent foreclosure. 

Based on the percentage of outstanding mortgages, South Carolina ranks 15th in delinquencies and 18th in foreclosures in the nation, based on the Mortgage Bankers Association's 2008 third-quarter delinquency survey.

In South Carolina, the Midlands is bracketed by the Upstate's appreciating and the Lowcountry's depreciating property values.

 "When you think about Columbia's economy, you've got the military complex, you've got state government and you've got the education systems here," said attorney Sam Waters, who represents lenders in foreclosure cases. "That's why, I think, Columbia has been able to maintain a fairly stable market, is because those are fairly stable employment situations."

Between 2007 and 2008, the median home price in Richland, Lexington and five surrounding counties area fell 1.7 percent to $143,000, while it dropped nearly 12 percent to $177,000 in Horry and Georgetown counties, according to the South Carolina Association of Realtors.

The figures are not entirely comparable, however. Much of the construction along the coast has been in more expensive condo projects, and in Myrtle Beach, for instance, the number of single-family homes has actually declined. As a result, during the past decade, median home prices in the Grand Strand shot up 25 percent to $180,000, while they rose at about half that in Columbia.

When property values skyrocketed, people often chose mortgages that allowed them to put little or no down-payment on the property, hoping to sell it at a large profit later, said Donna Moses, a loan officer with Homeowners Mortgage.

Though Sigafoos bought her home as a primary residence and not as an investment, she and investors along the coast had similar interest-only mortgages. Like Sigafoos, most thought they could refinance or sell the property before their interest rates increased.

"That property was appreciating in value so quickly that it didn't bother the consumer to take an interest-only loan or take an adjustable rate," said Debbie Senn Shumpert, a mortgage loan manager at the State Credit Union. "They originally never planned to be in that property for any extended period of time anyway."

Sigafoos did not plan to flip her property, but like many of the investors who did, she needed prices to keep rising. That way, even with an interest-only loan, there would be enough value in the house to let her refinance.

Then the bottom dropped out. A similar home in her neighborhood sold for $26,500 less than what she paid for hers. To even have a chance of refinancing, she'd probably have to come up with about $30,000 to cover that difference and any refinancing fees.

And there's a chance her house could be worth even less today.

Sigafoos has called the S.C. Consumer Affairs Department to report what she believed was predatory lending. She also has worked with Take Charge America and counselors certified by the U.S. Department of Housing and Urban Development to work with her lender to lower her rates. So far, nothing has changed.

"Everybody does have a right to live some place other than the street," she said. "Everyone has a right to have their kids not be afraid of where they live. You have a right to be normal, you know?"