Another 'Extreme Makeover: Home Edition' Family Facing Foreclosure

[Droid101]

http://tv.yahoo.com/blog/another-extreme-makeover-home-edition-family-facing-foreclosure--834

The team from ABC's heartwarming and popular reality series "Extreme Makeover: Home Edition" may give worthy families a whole new house. But yet another family who appeared on the show learned that they don't guarantee you'll keep that house forever.



The Wofford family of Encinitas, California, got their house from the show five years ago, but now claim that after struggling for two years to pay their bills, they're facing foreclosure . Dr. Brian Wofford, a widower and father of eight, explained the crisis, telling 10News: "A lot of people think when you get the house, you get the mortgage. Well, you don't."



The Woffords aren't the first family featured on the show to face serious financial problems after their home makeover. The Harper family of Atlanta, who received the show's biggest house to date, along with the money to pay taxes on it for 25 years, famously faced foreclosure last year after taking out an ill-advised $450,000 loan using the house as equity. And at least four other "Extreme Makeover" recipient families have had to sell or lose the homes they won on the show. ABC is probably considering changing the show's rules (maybe the houses don't need to be quite so lavish, for example) to help avoid such disasters in the future.



However, there's still hope for the Woffords. Loan modification papers are being promised by their bank, OneWest, next week. If they don't go through, the house will be auctioned by the bank in two weeks, but Dr. Wofford is optimistic about his family's future: "If I have my family and I live in a tent, I'm in good shape. Better be a big tent though."

Who is dumb enough to take out a $450,000 loan on a house that you know you could have never afforded to buy on your own? Just be thankful that you have the damn thing and leave it be! Jesus.

[Pigs in Space]

I think the Doctor should sell one kidney from each child he has.

8 kidneys will fetch a lot of cash.

[TiQuinn]

Yeah, I don't see how this is the fault of the show. Did the property taxes skyrocket as a result? That I could see. Obviously, taking out a huge equity loan is just pure stupidity on the owners part.

[Lady Fury]

I watch the show but I have to say a lot of those people got into their situation because of their inability to make good life choices. I'm not surprised that some of them are losing those houses. ABC isn't losing anything by giving them these huge homes. If they scale down their dream homes then I bet they'll lose viewers because then it becomes like any other show on TLC or the Discovery channel.

[Northcott]

Bad reporting. The Wolford family, who are the subject of the article, are not the ones who took out the loan on their house. Rather, it's hinted that they were left with the mortgage on the new house, which proved to be too much for them.

[Lady_Acoma]

The tags on this thread are awesome...

Property taxes raped me, and another friend too. My monthly payments jumped about $300 the year after I bought my house because of unexpected changes in taxes and then having to repay my escrow. I am now down about $150 from that amount, but for awhile there I was living on bread and water.

[Name Lips]

Yeah I heard the show was sad so many of the people they helped were losing their homes because of the new property taxes, so they started to pay their taxes ahead for a certain number of years.

I assumed the entire home was given to them with no mortgage payments too. If they subsequently take out a mortgage on it to get money to pay off the property taxes, or some other stupidity, its really hard to feel sorry for them.

[Kyle Voltti]

this is just one of the many problems I have with this show. they take these people on the verge of poverty and suddnly blamo they have mansions. Not to mention suddenly haveing a boat load of electronics they never did before rocking those monthly bills up. add in the personalized nature of the rooms can't make it easy to shift the homes once they have to sell

[Freedom Canadian]

Bad reporting. The Wolford family, who are the subject of the article, are not the ones who took out the loan on their house. Rather, it's hinted that they were left with the mortgage on the new house, which proved to be too much for them.

Yes, it's hinted, but it's not explained, so who knows what is really going on ?

[Droid101]

Well... don't they usually own the homes (or are at least owning while paying a lien-holder a mortgage) that they are currently residing in? And then it's torn down or just completely remodeled? Their monthly payments shouldn't change (except of course in the situation of taxes going up).

[The Theocrat of Poon-Tang]

this is just one of the many problems I have with this show. they take these people on the verge of poverty and suddnly blamo they have mansions. Not to mention suddenly haveing a boat load of electronics they never did before rocking those monthly bills up. add in the personalized nature of the rooms can't make it easy to shift the homes once they have to sell

No, actually the problem is here:

The Harper family of Atlanta, who received the show's biggest house to date, along with the money to pay taxes on it for 25 years, famously faced foreclosure last year after taking out an ill-advised $450,000 loan using the house as equity.

They have a house with the taxes paid for, yet they still needed $450,000 in loans? They don't deserve that house. Hopefully a nice, newly wealthy couple who actually earned their money will get it for a steal.

[Freedom Canadian]

They have a house with the taxes paid for, yet they still needed $450,000 in loans? They don't deserve that house. Hopefully a nice, newly wealthy couple who actually earned their money will get it for a steal.

Actually, that's another family.

I'm guessing the Woffords simply can't afford to continue making the mortgage payments they already had to make before the show.

[Old Fart]

My guess (which could be wrong) is that the Woffords had a mortgage -as do most "homeowners" - on their existing property. Extreme Makeover tore that place down and replaced it with a far better one, which is what they do. However, the mortgage on the original property was likely close to all the family could afford (it often is, especially for large families with a single income) and property taxes on the new place (which I'd guess was assessed at 3-4 times what the old place was worth) increased the mortgage quite a bit.

In the past few seasons, the Extreme Makeover folks have made an effort to get the mortgage on the existing property paid off as part of what they give the family, precisely to prevent this problem. The Woffords were from five seasons ago; I don't think the practice was as commonplace then.

The Harper family used their new home as a piggy bank, just as many people did in the creation of the housing crises that was one of the principal causes of the economic crises last year. While I don't want to excuse their behavior, they have a lot of company - the chief difference being their McMansion was donated to them.

[The Theocrat of Poon-Tang]

At some point this money they are being given becomes income. Now, ABC could "gross it up", to cover the taxes, but only up to a point where it starts to become self defeating (paying taxes on the "gross up" portion that was supposed to cover the taxes).

I believe the "gift" tax exclusion rules are $12,000 per donee per year. You can give someone that amount as a gift and they will not have to report it as income. That's probably how ABC is able to pay for the extra property taxes each year - the new taxes are probably around there. If it's a husband and wife, they can pay $12,000 to each one, too.

It becomes income to the recipients once that threshold is passed, I believe. So if ABC starts paying mortgages and taxes off, the family will have to declare some of it as income. Trust me, most of them won't have the money lying around to pay off their increased federal tax burden because of it, either.

[Brynja]

If you cant make the payments, sell the house - get what you can- and downsize.

This isn't rocket science.

[cyphersmith]

At some point this money they are being given becomes income. Now, ABC could "gross it up", to cover the taxes, but only up to a point where it starts to become self defeating (paying taxes on the "gross up" portion that was supposed to cover the taxes).

I believe the "gift" tax exclusion rules are $12,000 per donee per year. You can give someone that amount as a gift and they will not have to report it as income. That's probably how ABC is able to pay for the extra property taxes each year - the new taxes are probably around there. If it's a husband and wife, they can pay $12,000 to each one, too.

It becomes income to the recipients once that threshold is passed, I believe. So if ABC starts paying mortgages and taxes off, the family will have to declare some of it as income. Trust me, most of them won't have the money lying around to pay off their increased federal tax burden because of it, either.

The thing is, if Extreme Makeover paid off the mortgage for them, then the taxes shouldn't be too much of a problem. I know that I wouldn't have much of a problem doing so. The extra $1300/month should make it possible.

[Droid101]

If you cant make the payments, sell the house - get what you can- and downsize.


This.

[Limper]

Who is dumb enough to take out a $450,000 loan on a house that you know you could have never afforded to buy on your own? Just be thankful that you have the damn thing and leave it be! Jesus.

For the masses I agree completely however I'd be quite comfortable doing just that. I can beat 5-6% interest payments all damn day and not have to put forth much effort to do it.

[Freedom Canadian]

For the masses I agree completely however I'd be quite comfortable doing just that. I can beat 5-6% interest payments all damn day and not have to put forth much effort to do it.

Especially since your interests are tax deductible.

[Droid101]

For the masses I agree completely however I'd be quite comfortable doing just that. I can beat 5-6% interest payments all damn day and not have to put forth much effort to do it.

Bolded the important part. It's different when someone takes out $450,000 to go buy a new car, get their nails done, get bottle service at the club, etc., than when an experienced investor is rolling up his sleeves to go to work.

[Limper]

Bolded the important part. It's different when someone takes out $450,000 to go buy a new car, get their nails done, get bottle service at the club, etc., than when an experienced investor is rolling up his sleeves to go to work.

$450,000 at an 8% interest rate is only $3302 a month.

I'll be honest I get a hard on at the thought of someone giving me that deal.:)

2% return per month on 450k is $9,000 - 35% for taxes... leaves $5850 - $3302 leaves me $2548 profit!

At 1% a month I'd be losing money very slowly (about 300 a month) but would get more than that back from in tax returns after counting my mortgage interest.

[The Theocrat of Poon-Tang]

The thing is, if Extreme Makeover paid off the mortgage for them, then the taxes shouldn't be too much of a problem. I know that I wouldn't have much of a problem doing so. The extra $1300/month should make it possible.

I'm not sure you read what I wrote. If ABC writes a check for $100,000 to pay off the mortgage, that's mostly income to the recipient. Then these people have to cough up $20,000-$25,000 cash to the IRS. In most cases I don't think they would have that laying around.

[Dawnstar]

shows how much i know. I thought that when you got the house it was completely paid for. I figured that is how they gave some of these people such lavish homes.

[cyphersmith]

I'm not sure you read what I wrote. If ABC writes a check for $100,000 to pay off the mortgage, that's mostly income to the recipient. Then these people have to cough up $20,000-$25,000 cash to the IRS. In most cases I don't think they would have that laying around.

Nah, shows that I didn't think it through. Though they could still get a mortgage for that amount and be way ahead. And the interest rate would likely be pretty low, since it's on a much smaller fraction of the value of the house.

[Dacke]

shows how much i know. I thought that when you got the house it was completely paid for. I figured that is how they gave some of these people such lavish homes.
As I understand it, the homeowners don't pay anything for the new house they get from EMHE. That doesn't mean they get out of the loans they had on their house before EMHE showed up.

[Dawnstar]

As I understand it, the homeowners don't pay anything for the new house they get from EMHE. That doesn't mean they get out of the loans they had on their house before EMHE showed up.

Good point. I never thought of that.