Credit Card Report
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Wendy Lester is caught in the issue that’s worrying lenders, upsetting the credit markets and roiling Wall Street. It’s the credit problem, spreading now from the riskiest borrowers to good ones.

By the numbers, here’s her dilemma: Lester bought her house in Fort Lauderdale shortly after she was diagnosed with breast cancer in 2003. She says she owes $315,000 on it. She can’t afford to pay it anymore. If she tried to sell the house today, she says she would probably get $240,000. If she tried to rent it, she figures she’d get $1,300 a month, but her monthly payment is $2,700.

Meanwhile, the cancer resurfaced last year. Now her credit-card accounts are being closed. There is at least one lawsuit for nonpayment filed against her. She can’t work, because she’s still recovering from a second round of chemotherapy and an operation. Her family and friends have helped as much as they can.

It’s not a nice picture. And so, she shared it. Lester made her story into a video and put it up on YouTube. She sent out a press release about herself. “I put it out to the universe,” she said.

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The problem is obvious in hindsight — and it belongs to Lester, her lender and to the cancer that prevents her from getting a full-time job. When her home went up to $340,000 in value, she says her lender allowed her to borrow $325,000 against it. Now it’s not worth enough to salvage the loan.

An attorney advised her to give it up and file for bankruptcy.

“But a lot of my identity is tied up in always doing the right thing, paying all my bills,” she said. “It’s a shock to the system to imagine bankruptcy and foreclosure.”

Nationwide, the number of people in situations like Lester’s is growing. The credit shock first arrived in the subprime mortgage market, where delinquencies are soaring. The second one was the news last week that borrowers from the nation’s largest mortgage lender, Countrywide Financial, were getting into trouble because of home-equity loans — to borrowers with good credit records.

And here’s something perhaps you haven’t heard: People with the lowest credit scores are making a decision to pay their credit cards rather than their mortgages. If you want to hold on to your house, that’s the wrong decision.
- Excerpted from: Even low-risk borrowers facing credit distress, South Florida Sun-Sentinel, July 29, 2007