Dolores Fair has heard it numerous times before: "You should have known better."
When she looks at the last three years of her life, she says that part of her agrees with that statement—but another part of her can't help but think she was misled into a no-win situation.
Fair will most likely lose her house when her lender heads to bankruptcy court on July 15. Fair bought her modest three-bedroom house off Houghton Road north of 22nd Street about 17 years ago. Her husband, a Desert Storm veteran, had just died. She moved to Tucson to start over with their two sons, buying the house with money from her husband's life-insurance policy. (See "Foreclosure Madness," Feb. 19.)
Fair went back to school and eventually got a master's degree in counseling. However, her life was interrupted on Sept. 23, 2006, when her youngest son was diagnosed with valley fever. He spent the next 10 months in a Phoenix rehabilitation center, and Fair spent most of her time by his side.
"I didn't want to leave him alone. If he didn't lay a certain way or receive specific treatment, there was a chance he would never walk again. I had to make sure that didn't happen," she explains.
When he was released to his mother's care, the two returned home to find out that her house was in jeopardy of foreclosure. Her mortgage company, Washington Mutual, told her they couldn't work with her, because time had run out.
She panicked. Through a friend, Fair says, she found out about Miracle Mortgage, a company that claimed it could refinance her loan, based on the estimated $70,000 in equity she had in her house.
Fair says she never met with the broker, Dennis Wilson; instead, they conducted all business by phone and fax machine. In February 2007, she was approved for a $150,000 loan.
The loan didn't require Fair to make any payments for a year, and it provided her with almost $30,000 in cash to live on while she continued to care for her son.
When she received her first statement, she was stunned to learn that the Miracle Mortgage monthly payment was $1,625. Her Washington Mutual payment had been $625 a month.
"At the time, I really didn't know," Fair says. "I didn't really understand."
For three months, she was able to make the payments using her savings. She thought her situation was looking up when she got a new job as a counselor and was earning enough to pay the loan. However, she was laid off, and Fair says she hasn't been able to find a job since then.
Fair tried to get assistance through local agencies that help with house and utility payments, but was told her payment is too high. It's also been difficult for anyone to negotiate on Fair's behalf, because her Miracle Mortgage loan isn't a typical mortgage.
Miracle Mortgage (www.investindeedsoftrust.com) specializes in what are called private real estate loans, in which a broker, like Wilson, works with a private party to secure a loan for someone like Fair. For the lender, it is an investment in a deed of trust and a way to earn an income from the monthly payments made by the borrower.
According to Wilson's Web site, the annual interest rate on the loans is generally between 12 to 18 percent. In Fair's case, her loan was at 13 percent interest. According to the loan documents from First American Title, $19,500 went to the private lender at closing; more than $800 in broker fees went to Wilson. The loan is due in its entirety on May 13, 2012.
Wilson says he does many loans like Fair's and has never had any problems.
"She was in foreclosure when she came to us as a resource. She didn't have a job, and her son was sick. I explained to her that she was in no position to qualify for any kind of (regular) loan. She'd have to go through foreclosure or accept private lending," Wilson says.
"Look, this isn't a loan to end all loans. I told her it would only buy her a year to get her life together. She was clear on her options. There was no way she could manage the payments for this loan, but that wasn't the point: The point was that it gave her a year to get a job. Had she done the things I recommended, she wouldn't be in this predicament."
Wilson says he told Fair to find out if she could get a Federal Housing Administration loan, and to look at selling her house to get out of the loan—and the inevitable foreclosure.
"Had we not interceded, she would have lost her home," Wilson says. "It was not about whether or not this is a good loan. It's a terrible loan, but there was no one else who could help her. ... We did not take advantage of Dolores. In fact, it was exactly the opposite. We didn't put her in foreclosure. We helped her stay in her house for a year."
Jordan E. Madison of Oro Valley is the private lender who worked through Miracle Mortgage on Fair's loan, along with his son and daughter-in-law, James and Amy Madison of Chandler.
Madison says all Fair had to do was get a job and make payments.
"Everyone goes through hard times. Some people have to live in cardboard boxes. I've already lost $50,000 on this loan," Madison contends.
Madison says he didn't receive the $19,500 outlined in the title-company paperwork. He also says he tried to work with Fair when she first fell behind in her loan payments.
"I offered to rent her the house for $1,200 a month for a few months. But she refused that. I am not a hard man. ... I'm running out of money, too. I drive a used 1996 Cadillac. I'm not that rich anymore. I just want you to know that if she hadn't talked to Miracle Mortgage, she would never have been able to live free in that house for a year. There is nothing wrong with what I did."