My housing bust redemption
My greedy investments left me homeless. A dear friend saved me.
It was the spring of 2005 and the housing market was in a frenzy. Against my better instincts, I let my realtor convince me to join the fray. Although that decision cost me much of my life savings, it taught me a lesson that years of graduate school never did – believe it or not, life's not about the money.
Less than 15 years ago I was still living paycheck to paycheck. Then I got a position as a tenure-track assistant professor. I relocated with my three kids to California and continued to work hard, save, and invest conservatively. Within a year, I'd accumulated enough savings to put a down payment on a house. I continued to max out on my 403 (b) every year after and I was content.
Throughout the next few years, I sat back and watched the value of my home soar. That was when my broker strongly suggested I use some home equity to purchase an investment property though my instincts suggested otherwise.
I didn't need my PhD in economics to tell me that what goes up must eventually come down. But my broker reassured me that the market wasn't at its peak yet. So I bought on spec, hoping to flip the house in a few years.
I moved into the investment house and when the house next door went on the market a few months later, I called my broker. He couldn't get me approved based on my financial status. Neither could the next broker. The third broker was more creative. He secured a loan for me that I didn't understand the terms of and shouldn't have qualified for.
With the monthly mortgage expenses, I was barely making ends meet. Nevertheless, I was a landlady twice over and a proud "owner" of three homes. I fully expected to become a millionaire in a matter of years.
But, almost immediately, the housing market turned. The loans reset and my payments escalated. Eventually, I stopped making payments on my residence.
The bank sent a Notice of Trustee Sale; my home would be auctioned off. I had to find a place that would accept my 16-year-old son, his 100-pound puppy, and my ruined credit profile. There weren't any willing landlords.
So I ran to church and wailed my grief. Ask and you shall receive, I thought. "All I ask is a roof over my shoulders," I cried. Then I felt a certain peace – a calm that I hadn't felt in the past several months. A few minutes later, I left, hopeful, though still uncertain what the next step was supposed to be.
As I stepped out of the chapel, a diminutive gray-haired lady named Helen was entering.
"How are you, May?" she whispered. The floodgates opened and I spilled all, ending with, "I need a place that would accept a big dog before the sheriff throws us out."
Helen proffered some Kleenex. "What kind of dog is it?"
"Oh, those are beautiful."
"Well," Helen began, staring up at me. "I got a big backyard for the dog, and if you and your son don't mind living with an old fogey like me, I have spare rooms."
And she was serious.
As I started to ask how much rent would cost, Helen stopped me. Don't worry about that," She said. "The house is paid off."
So, for the next two months, my son, his dog, and I lived with Helen.
While living with her, my second investment house went into default. It didn't faze me though, as I was busy learning some hard lessons from the school of hard knocks.
On our last night with Helen, I caught up with her in her parlor. "Thanks for harboring us," I began. "But for you, we'd have been homeless." Helen laid her novel on the lamp-stand and faced me. "I don't think the Lord would have let you be homeless, May."
And then, shaking her finger at me, continued with good-humored raillery, "But let this serve as a warning: don't yield to greed, listen to your intuition – that's God speaking to you. And when it comes to investing, stick with the energy stocks, utility stocks, and treasury bonds." I chuckled and replied that bonds didn't make millionaires.
She shifted in her couch and sat up. "Why you wanna be a millionaire, anyway?" She stared at me as if expecting a response. I just shrugged. She continued. "All I ever asked the good Lord for is my daily bread."
And since that day, the fear of financial insecurity has left me. I know that as long as I work hard and invest prudently, I will always have enough for my daily needs.
• May Akabogu-Collins teaches economics in San Diego, Calif.