Steadfast FinancesLiving Beyond Your Means: School Bus Driver Losing Her $800,000 Home to Foreclosure - Steadfast Finances

Living Beyond Your Means: School Bus Driver Losing Her $800,000 Home to Foreclosure

Filed in Consumer Education , Financial Planning , Mortgages 51 comments

Every now and then you see one of those news stories that make you shake your head and say…

What???

CNN ran an all too common story today about a family who is, sadly, about to lose their $800,000 home due to foreclosure (see video below).

Such stories are becoming commonplace and subsequently losing their newsworthy appeal, but a “small detail” stood out in this story that seemed to be quickly passed over.

This “small detail” that stood out like a jalapeno pepper in my Cheerios is that one of the co-owners of this $800,000 home is actually a school bus driver (the second family member’s profession was not disclosed).

Living Beyond Your Means

Maybe I’m wrong, but I was under the impression that anyone who drives a big yellow bus full of screaming kids is a few pay grades below a cardiac surgeon that invested 10 to 15 years of their life learning a highly specific tradecraft or a successful small business owner who busted their hump for 15 hours a day after 10 years of hard work.

I say this from a tough love standpoint because when I think of homeowner who has an $800,000 mortgage, I generally think of someone (or a dual income family) that does very well for themselves by bringing home a home a sizeable six figure income.  You know — someone who can actually afford to pay the mortgage and real estate taxes without having to rely on credit card debt to pay for everything else.

To be fair, CNN didn’t delve into the specifics of this couple’s finances, so it’s entirely possible that my hawkish criticism has led me down a path of unfounded speculation. Maybe the husband (who was not interviewed) had an excellent paying job and was recently laid off. Perhaps there were unforeseen medical expenses that took priority over the mortgage payment. Many things could have happened after they signed on the dotted line and put them on the foreclosure chopping block.

Regardless, as I sat incredulously watching this video I’m thinking… just what in the world were these people thinking?

Anyone who drives a bus can’t afford a $800,000 house!  Right?

Scaled Up Consequences of One Bad Decision

We are beginning to see more and more reports of this sort of financially irresponsible behavior where an unknown percentage of the U.S. population bought entirely too much home than they could afford, and only now have they figured out that it was a huge mistake.

I can empathize with those who say “why shouldn’t we have nice things like everyone else?“.  Then again, you could argue that this is the typical rationalization every 17 year old kid justified to himself before dealing drugs.  He knew it was a risky decision, but he just wanted to have some of the finer things in life.

Just because you see everyone else making a bad decision, that isn’t the green light for you to make the same bad decision.  This is where prudent judgment and sound financial planning should help you put on the brakes, assess the situation, and accurately gauge just how much home you can afford.

On a more macro scale, once you begin to multiply this family’s mistake a few million times over, you begin to see more dark clouds on the horizon for the U.S. economy.  Hence the reason why the stock market is down ~50% from its highs.

Champagne Taste on a Beer Budget

My grandfather, who actually lived through the Great Depression, frequently used the idiom “don’t let your champagne taste ruin your beer budget”. As a kid, I couldn’t fully grasp the wisdom of this message but I practiced the message because it made sense.  After all that has transpired, I give a little smirk when I watch the doom & gloom news reports because now, I fully understand what he was trying to convey.

So while mainstream media and the never ending stream of ridiculous TV shows (e.g. MTV Cribs) were hyping lavish lifestyles saying it was your God-Given, American right (not privilege!) to own a home, it was actually the equivalent of a carrot being dangled in front of a horse just to make him continue pulling the wagon.

The truth is that most of that message was complete bologna made to cloud your rational brain from asking if you could really afford it.  That’s common knowledge to most everyone now, but it is important to highlight the distinction between what you want versus what you can afford before you make the decision to buy a big ticket item… like a $800,000 house!

So the next time you see that monstrosity of a home that you’re just dying to own, that $70,000 Escalade or maybe even a pricey bottle of bubbly when all you can afford is cheap domestic beer, maybe you’ll think twice before being suckered in and living beyond your means.

~ ~ ~

Photo by kippefinger

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Posted by CJ   @   23 February 2009 51 comments
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51 Comments

Comments
Mar 2, 2009
2:22 pm

Yeah, I wonder how she’s able to afford that house. She should of bought a 300k-500k house not a 800k house.

I think that’s personally her fault. But also the lenders for fooling her into getting into it.

She was naive and got played by the lenders. ;)

Mar 2, 2009
2:44 pm
#2 Matt :

@ Paul

Agreed. It takes two to tango!

Mar 3, 2009
1:16 am
#3 thomas :

She’s an idiot. Her husband is an idiot. We can’t function as a society if we always bail out idiots.

Mar 5, 2009
2:13 pm
#4 Wendy :

If you listen to the video from CNN, it states that her husband is in the construction industry. She is a bus driver but he has a job in an industry that at one time was a profitable industry. It is very possible that at the time they bought their house, they were able to afford it. But given the state of his industry, are now facing trouble.

Mar 5, 2009
2:52 pm
#5 Matt :

@ Wendy,

Thanks for commenting. This CNN video didn’t disclose the husband’s employment status so it’s good to find another another location disclosing that information. Do you have the link to that video/article?

Mar 5, 2009
5:31 pm
#6 Wendy :

http://www.cnn.com/video/#/video/us/2009/03/05/acosta.foreclosure.outrage.cnn

It’s at time frame 1:26. It says she and her husband and construction worker.

Mar 5, 2009
5:55 pm
#7 Matt :

Thanks Wendy. I plan on writing a follow up to this 2nd video this weekend. Unfortunately, the embedded video above didn’t disclose the husband’s employment status since your link is a Part II follow up segment to blogger’s reaction.

I also saw a few comments on other blogs saying her name was Arminta Garcia and she (and her husband) are real estate flippers. Not sure if that’s true or not, but it would certainly be some egg on CNN’s face if someone can confirm this as fact rather than speculation considering the tone of the first video.

Finding out her husband was a construction worker doesn’t make me change my original opinion that they lived beyond their means even when both of them were employed. The husband would need to make $100k to $200k per year to realistically have the ability to repay a mortgage like that unless they made a huge down payment.

May 30, 2010
2:52 pm
#8 Seth :

He may have been a construction worker and also operate a construction company.

Like you may say that Ken Lewis is a banker who is also the CEO of Bank of America.

I assure you that some people in construction were easily earning more than the $200,000 annual income and probably had a 15 year track record of doing so by 2006. His wife probably had a real job because of the health insurance problem for the self employed.

FYI- construction is a high revenue, capital intensive, and low margin business, like airlines.
It doesn’t take much to sink these guys.

Mar 5, 2009
6:26 pm
#9 RP :

We live in CA and although our combined gross income is around 200K, we didnt buy a house here since the home prices here, were and still are, outrageously expensive. We were prudent and did our part, but feel sad that irresponsible people like her are getting attention and being bailed out. We thought of every possible scenario – loss of job, schooling expenses, etc. How could anyone not think of all possible circumstances before buying an 800K home is beyond me.
I see people developing the mentality that they will just walk out or not pay the mortgage if they go underwater on the home value. Oh ya…we will let the lender worry about it.
Home prices still havent come down to levels that can be considered normal or cheap atleast in CA. And if the obama administration doesnt let that happen by preventing foreclosures, its just pushing out the inevitable.

Mar 5, 2009
9:13 pm
#10 JB :

I watched this report, and I remember her saying her husband was a construction worker.

Mar 5, 2009
10:14 pm
#11 Wendy :

Matt you are correct in that their combined income needed to be substantial. We don’t know what their situation was when they bought the house. My husband is in the construction industry and when we built our current house, he was making close to $100K (mid $90s). That was 2 years ago. Today, he is making $40K less and it hurts. Our house is no where near $800K, thank goodness. We didn’t buy above what we could afford then. It’s just this industry has taken a huge hit.

I know there are a lot of homeowners out there that bought more house than they should have. But there are some that were smart at the time they bought. It’s just things suck right now and those that you would never thought would have trouble are having trouble.

Mar 6, 2009
12:40 am
#12 Matt :

@ JB,

The video I included above was only Part I, and did not disclose the husband’s profession.

The video that came out today (3/5) was a Part II response to acknowledge the bloggers and negative remarks that peppered Mrs. Garcia’s Facebook page. I’m sure CNN didn’t mind running with a hot story a second time either.

@ Wendy

I certainly agree with you that times are tough — especially for the home building related industries and those that service them. But the saving grace in your situation is that you were smart, lived within your means, and you can continue to live in your home without needing any “unnatural” assistance to keep your home.

The scary side of the recession/depression scenario is that people who played by all the rules begin to lose their jobs, and later start defaulting on their mortgages. That is where things get tricky and some leniency could potentially be implemented.

Oct 29, 2009
2:12 am

This school bus driver may have been in over her head, but do know this, A LOT of blue collar workers make A BOAT LOAD of money.

This is what I wrote in “Fortunes, Fortunes, Everywhere”. Policemen, Fireman, Longshoremen, all are making 6 figures, with 6 figure pension upon retirement.

My point is that there’s a lot more wealth that one thinks.

Dec 25, 2009
12:58 pm
#14 Kidgas :

I am hoping that the recent increase in the savings rate leads to a new generation of Americans thinking like your grandfather. My grandparents, too, lived through the Great Depression and I remember hearing the stories as a child. Unfortunately, the further away we got, the easier the lessons were to forget.

I hope that my kids will be able to learn from these recent events and live within their means.
.-= Kidgas´s last blog ..In the Top 1 Million!! =-.

Jan 22, 2010
5:15 pm
#15 Kyle :

Alas, the cost of hops has gone up so much the last few years, even a beer budget is beyond the means of many Americans. Especially if they drink good beer.

Feb 20, 2010
7:53 pm
#16 Barbara Saunders :

I agree with the general principle of living within one’s means. I have no house. I am also single and recently picked up and relocated temporarily for work. I have no pat judgment, though, about other people’s situations. I most recently lived in San Francisco. Realistically there are people there living “beyond their means” on more than six figures. Set aside the fantasies and one realizes that, even in San Francisco, there are a whole heckuva lot of people with good jobs who are just not ever going to earn 6-figures. What are they supposed to do?

“Move,” people chime in. But what do you do if you grew up there? Your sick mom is there? Your job is there, and you really can’t move it? Tenancy-in-common with friends may not be a good idea, but what’s the other option? Stretching to buy an overpriced home with no cushion may not be a good idea, but what’s the option? Rent? Ha! Rents are through the roof, also.

Many people make bad and irresponsible choices, to be sure. But I think there’s a bit of denial operating when we castigate people who literally had no option available that wasn’t “irresponsible.” People have to live, and most do the best they can.

Feb 21, 2010
10:55 am
#17 Matt SF :

People have to live, and most do the best they can.

While I agree wholeheartedly with that statement, the folks involved in this video fancied themselves as real estate investors/speculators. They bought at the top, couldn’t afford the payments, lost a job because the husband worked in real estate/construction, etc.

So in my opinion, they fell victim to the get rich quick dream (or scheme) and didn’t want to pay the consequences.

May 12, 2010
8:06 pm
#18 Financial Bondage :

bus drivers don’t make that much money. how can they afford a home like that? Oh I guess they can’t its in foreclosure. Jeesh. What a story.

Dec 30, 2010
11:56 am

I know a lot of people that bought their house with a no verification mortgage and the majority are honest and hard working individuals and without a stated loan they very likely would not have been capable of buying. This kind of loan options in my opinion have their place, they just should be more tightly regulated and not coupled with zero down programs, but 10% to 20% or even more money down.

Dec 30, 2010
4:32 pm
#20 Matt SF :

I can agree with most of that Josh. I don’t think all option ARMs or subprime loans are “evil” per se, just that deregulation of this entire area of the market was allowed to grow and metastasize far beyond what should have been allowed.

The most vocal critics claimed “it’s our right to own a home” or “we don’t want to live in a nanny state”, and yet, they’re either bankrupt, bailed out or shunned by financial media after the credit/real estate bubble burst.

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