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House price: $3,500. Mortgage: $228,000

True story. In reporting for my cover story in this week’s issue on the housing market, Meltdown, I spoke with a 73-year-old man named George Clark. In 1977, Clark and his wife Mollie, who have six children, bought a four-bedroom house in North Minneapois for just $3,500. Things were fine until a few years ago, when they started getting bombarded by offers of new mortgages and home-equity loans. “We would get these calls and letters all the time. They were saying, ‘I can put some money in your pocket,’” recalls Clark. “These guys sounded so honest, we thought they were on the level.”

The Clarks had a pile of credit-card debt and needed some work done on the house and the car, so finally they bit. They didn’t consult a lawyer. They signed a thick stack of papers without reading any of them or having a real concept of what they were getting into.

It turned out that they had legally sworn, by their signatures, that Molly, who is also 73 and whose sole income is about $800 a month in Social Security, was earning $6,000 a month. They had paid an appraiser $4,000 to certify that the house was worth more than the loan. They had also taken on an adjustable-rate loan with a sharp payment escalation built in. The monthly payment began at around $1,300 and has since risen in steps to $2,300, which is more than the Clarks’ combined monthly income.

Ordinarily the Clarks might sell, but the amount they owe, $228,000, exceeds what they could get for the house if they sold now. It’s appraised at $174,000, and that may be high.

The Clarks have made the rounds of social-service agencies asking for help, but none of them has been able to get the mortgage servicing company to cut a deal. The servicer says its hands are tied.

Says Clark: “I don’t know what to do now. Every night can’t hardly sleep wondering if they’re going to snatch your house away from you.”

A neighbor told him it was all part of a scheme by white people to force the blacks of North Minneapolis out so they could move into the neighborhood, which has nice homes and is convenient to downtown. Mr. Clark isn’t quite prepared to believe that, but the whole experience has left him deeply disillusioned.

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