Over the weekend, I had the occasion to think about everything I had gone through in the last 5 years. Don’t ask me why; I just did! Like a bad movie on an endless loop, I kept replaying everything that conspired to send me to credit and financial hell and before we get to answering the question, I need to set the stage for you first!
2007: My cousin, who had been like a sister to me growing up, confided in me that she and her domestic partner (hereby referred to as Satan) had lost millions gambling and that they were on the cusp of 2 foreclosures, car repossession, and soon to be out on the street! Better yet, she had my mom set the stage for her!
At the same time, my mortgage business was about to be hit by a tsunami, as was the housing market in general, across these United States. Mind you; at this time I had ZERO debt other than my mortgages and car leases. I had some investments, life insurance policies, and over $200,000 in liquid cash. I thought I was good, but I WAS WRONG!
Stupid is as Stupid Does
Foolishly, even though I had anticipated what was about to happen in my business, I decided to help my cousin and Satan out. It gets worse! They had two homes and on one of them, they had a sub-prime Country Wide mortgage with a sky high interest rate. On the other, they had a “hard equity” mortgage they were paying almost $5000 a month for.
How they got that mortgage in the first place was beyond me! There was definitely a usury issue with that mortgage and I’m sure if an attorney had looked at that paperwork, they would have agreed. Oh, wait, I forgot; the mortgage was originated by a Miami Attorney who made the loan in the first place. But anyone who’s ever done business in South Florida knows; that’s Miami!
What the F*#K was I Thinking About?
The first home I had ‘quit claimed’ to me so I could refinance it to a better mortgage. This effectively cut the mortgage payment in half. I had an agreement and a lease drawn up, they would make the payments, and I would help them rebuild and correct their credit report so we could ‘reverse’ the process.
The other house was an almost $800,000 dollar home that would be used as the catalyst to repay my loans and put my cousin and Satan back in business. I drew up a sales contract to purchase the home and since it was an investment property, I had to put down 10% percent to purchase it. After paying off liens, open permits, insurances, and the like, I was now a $100,000 dollars plus lighter!
They had been in business for many years as furniture manufactures and when Hurricane Wilma hit in 2005 and destroyed their warehouse, they had cashed out on a $3 million dollar plus insurance policy which they promptly blew over the course of the next 2 years gambling.
Confusing Empathy With Stupidity
In a meeting, they convinced me that with $100,000 in cash, they would have their business up and successful in no time. Now Satan may have been Satan, but she was a very business savvy woman with a proven track record of business success. What I wasn’t aware of was just how bad her gambling habit was! My cousin made sure of that!
Since the mortgage payoff was roughly $400,000 for that home, they would stand to pocket more than $300,000 from the sale. That would supply the $100,000 they needed to restart their business and cover all expenses for at least 6 months and then repay the money I had lent them which at this point, was over $164,000 dollars! Hell, they would even have $40,000 dollars to survive on for the next year!
Here’s What I Didn’t Tell You
What I didn’t tell you was that I had a tax bill coming due of $64,000 dollars which I didn’t think twice about because I thought I had it all planned out! My cousin would be saved from financial ruin, they would have an opportunity to do what they had already been successful at, I would get my money back, and all would be fine! But funny thing happened on the way to “being fine”; my cousin and Satan showed up to the closing with no bank account!
I should have stopped the closing there…but I didn’t! Don’t ask me why – I just didn’t! We walked them downstairs and tried to open up a checking account but couldn’t; they were in ChexSystems for bouncing checks. They made a phone call to their old bank and said they would have an account open by the next day. Off they went and as I said earlier, I had everything done legally, written up by an attorney, notarized, and I thought my ass was covered. After all; this was my cousin – family. She would never screw me; would she?
Next Stop; Credit and Financial Hell
The closing agent was supposed to cut me out a check to make me whole per the agreement we had signed. But at the last minute, he refused to do so. To this day I have not gotten a ‘satisfactory’ answer other than the Underwriters were now frowning on cutting out checks to anyone other than the seller. I didn’t believe it then, and I don’t believe it now. This was a person I’m sure I provided more than half his title closing income for over several years, but that no longer mattered. Whatever could go wrong, was officially going wrong!
On top of that, Satan had disappeared! I could not reach her and she had a check in hand for $300,000 dollars plus; I had “gots”. If you’re Italian or ever watched the Soprano’s, you know what I mean. Two days later I got a call from the closing agent informing me that a bank called to confirm the origins of the check and provided me with all their information. I promptly got the bank manager on the phone, faxed her all of the paperwork, and told her I was contacting their corporate security as Satan was about to perpetrate a fraud on me and she would be complicit if she allowed this transaction to continue.
Satan Really Is Satan!
The Bank Manager got Satan to call me on her speaker phone. She agreed that I was due the monies and the bank manager said she would be faxing me a letter to confirm my wiring instructions. She would wire the funds directly into my account. Finally, all’s well that ends well, right? WRONG!
Somewhere between my faxing that letter back to the bank and whoever wired the funds, instead of getting $164,000 dollars plus wired to me, I only got $64,000. Somehow, Satan managed to change those numbers and I’m sure there was some help along the way. But it doesn’t end there. As I fought to get that money, Satan did not vacate the house and instead ‘squatted’ on the property! Since this wasn’t the 1920’s, I couldn’t just show up to the house, baseball bat in hand, and throw everyone out! I had to use the legal system even though the house was mine!
It Can Always Get Worse
It most certainly can always get worse and for me, that’s exactly what happened. My cousin was now in on the dastardly deed as well. This whole thing was planned out! They had failed to pay me the first month’s rent and since I never took any deposit money when signing the lease, their was no ‘consideration’ so it became null and void! They tried to have the check for the rent delivered to my office 2 days after the fact, but I did not accept it. Instead, I had to get a lawyer to get them out of not one, but 2 houses, of which I was paying almost $5000 dollars a month not to ruin my credit.
Almost 2 years and a quarter of a million dollars later, I was squarely residing in credit and financial hell and… I brought my family along for the ride! So let’s get to that question; what’s more important; having cash or saving your credit? As you can see, this question became very relevant to my situation and one I should have thought about way before I entered the gates of credit and financial hell!
So What’s Your Answer?
One more thing; before I completely hit rock bottom, the IRS smacked a tax lien on my credit that basically rendered me useless! This hit my report just as I was about to turn my lease into a purchase so I could remain with my car. Instead of a credit score that was hovering near 800, I now was in the low 500′s. I had over $150,000 dollars in available credit that in a matter of only a few months, turned into ZERO! Not because I used it, but because I now was deemed not worthy, even though I had perfect payment history, credit, and most of the cards didn’t even have a balance to begin with.
Credit cards that had high limits in the 4 digits each, now had credit lines of a hundred dollars! So I ask you; what’s more important; having cash or saving your credit? Should I have stopped paying things sooner and put the cash away to help me recover from what I already knew was coming? What would you have done? I know what I wish I would have done, but I’d like to hear your take and your answer. And yes, before you go stating the obvious; of course I should have never allowed myself and my family to be put into such a financial bind…but I did! Fire away!