One Family's Struggle to Pay Their Mortgage

This week Billy Annese turned 28. That's remarkable since doctors once predicted that he'd never make it past 16. Annese suffers from a disease called Friedreich's ataxia, a progressive neurological disorder that, much like multiple sclerosis, gets worse over time. These days, Annese is in rough shape. He uses a wheelchair to get around; he's lost his sight; he's nearly lost his hearing. For his parents, Keith and Kathleen Annese, taking care of Billy is a 24/7 job. (Lately they've taken to communicating with him by tracing letters on his face with their fingers.) But when they're not worrying about their son's health, the couple, both 47, have another huge concern: their house and the possibility of foreclosure.

The Anneses live in a lakeside ranch home in Framingham, Mass., about a marathon's run from Boston. They bought the house in 2003, paying $385,000. As soon as they bought it, the couple spent $25,000 (taken from Keith's retirement account) to build handicapped ramps and widen doorways to make the home accessible for Billy.

But as Billy's mobility decreased, the home required more modifications. By 2004 he was having problems using the home's small bathroom. It wasn't big enough to fit a commode chair, so he was forced to use a portable toilet placed in his bedroom. "It was tough for him when he had friends over," Keith says. "It digs into you, going to the bathroom in your bedroom instead of the bathroom." His parents were also having a harder time carrying him from his wheelchair into the tub to bathe. "We couldn't take the chance of him slipping," Keith says. "It was getting too dangerous."

So buoyed by the rising real-estate market, the couple opened a home-equity line of credit and hired contractors to add a new handicap-accessible bathroom, as well as enlarge the kitchen to allow Billy's wheelchair to enter the room. Like most remodeling jobs, theirs went over budget, especially after they updated the ancient appliances. "The house was built in 1955, so pretty much everything needed updates," Kathleen says. By the time they were done, they'd spent $195,000. The good news was that by 2005, their house was worth $560,000, so they rolled their existing mortgage and the line of credit (along with some credit-card debt) into a new mortgage. They ended up taking out a type of loan they'd never heard of before, including something called an "Option ARM," which featured a variable interest rate. They thought it would turn out OK.

The couple admits they were a bit naïve about the loan process. "I just listened to people I shouldn't have listened to … [they] said 'Oh, don't worry… You can refinance this. You'll never have to worry about a rate increase,'" Kathleen says.

In the last year, making the payments has turned into a real stretch. While Keith's job as a painter at a local college seems secure, Kathleen has had to stop working to care for Billy. As their income has dropped, the interest rate on their Option ARM has risen. Today their mortgage payments total around $3,500 a month—a sum that's equal to more than 50 percent of their gross income. (Mortgage experts say payments above 38 percent of income are usually hard to manage over time.) Keeping up the payments has been a particular struggle as Billy's medical costs keep rising. But Kathleen, who once worked at a credit union and thinks it's important to try to maintain a good credit rating, says they haven't missed a single month. It's come at a cost. "We've been borrowing from family members, we're maxed out on credit cards, we're just getting by and giving up everything else," she says. "It's just been overwhelming."

The family says they've called their mortgage servicer, Countrywide, several times to talk about ways to make their payment more affordable. The company was unresponsive, they say. "They just don't seem to want to work with us—maybe there's nothing they can do," Kathleen says.

When NEWSWEEK spoke with Countrywide about the situation this week, a representative says their records indicate the Anneses have only called once to discuss their mortgage problems, and haven't called at all in the last 18 months.

"Now that we understand they're having financial difficulties, we'll reach out to them," says spokesperson Jumana Bauwens. "We urge other borrowers in similar situations to contact us." While some loan modification programs require borrowers to be behind on their payments before seeking a modification, she says Countrywide welcomes calls from troubled borrowers even if they're payment record is clean.

While Bauwens could make no guarantees, she said that since the Annese's loan is an Option ARM, they may be eligible for some relief under an agreement Countrywide reached last month with the California Attorney General's office, which had sued the company earlier this year. While the company would need to closely study the family's finances before making a loan modification, Bauwens says they are now routinely converting Option ARM borrowers into fixed-rate mortgages with payments equal to 34 percent of the borrower's income. In some cases, Countrywide is willing to reduce the total amount owed to 95 percent of what the home is currently worth, to help borrowers who are now underwater.

Overall, Bauwens says, Countrywide expects to modify nearly 400,000 mortgages under the settlement. So far this year, the company has already given concessions to over 158,000 borrowers who were having trouble making payments.

But even if Countrywide helps Billy's parents convert to a more affordable mortgage, other experts say they'd benefit from having an outsider take a hard look at their larger financial picture. "There are several different red flags," says Josh Fuhrman, director of counseling at the Homeownership Preservation Foundation. "They refinanced several times, they're [maxing out] credit cards, borrowing from family—they're probably over their heads and need some guidance on how to look at their overall situation, not just their mortgage-related problems."

Fuhrman's organization has counselors available 24 hours a day to help troubled borrowers deal with mortgage problems. They can be reached at 888-995-HOPE.

Amid a deepening recession and with the Thanksgiving holiday approaching, the Anneses' story is a reminder that those of us who are able to pay our bills have much to be thankful for—and that we should keep those who aren't so fortunate, like this family, in our prayers.