How My Neighbor Lost His Home

My neighbor, Tom, is a good person. A widower with two children nearly grown. He owned a modest bi-level home in Tinley Park. He and his late wife bought the home when interest rates dropped to below 12 percent and he had only 8 years to pay off the mortgage.

His son wanted to go to college. He was an average student, but not an athlete or academically gifted. He scored well on his SAT tests and was accepted to the University of Illinois. My neighbor didn't have the money to pay for his tuition and then he got something in the mail from a mortgage broker. It was a simple advertisement, but it said that his house was worth about $15,000 more than he thought it was. They urged him to take advantage of their "low" financing rates and refinance. He could save money and get cash back.

Tom wanted his son to go to college, so he called this mortgage broker. After a brief interview, the person to whom he spoke made an appointment to go and see him. He convinced Tom that not only could he get the money he needed to send his son to school, but fix up his home as well.

With only 8 years to pay on his relatively low mortgage, Tom agreed to refinance. He would not only be able to send his son to college, but his daughter as well. And he would be able to do some repairs to the house and even buy a car. The mortgage representative explained to him that as mortgage interest is deductible, it made sense to use the equity in your home for large purchases.

The mortgage company gave Tom a set of forms to complete. Tom's wife usually did all the paperwork, including paying the bills, but now it was up to him. He really didn't have to do much. Just sign the paperwork and give it back to the mortgage rep, who was sitting at the kitchen table having a cup of coffee. The mortgage representative briefly explained each document as Tom signed by the "x."

Tom was pleased that there were no "up front costs." He didn't have to pay an application fee or even for the appraisal. The mortgage company arranged for the appraisal and then called him into their office to close the deal.