Three years ago, Milton and Patricia appeared on Extreme Makeover: Home Edition and received a complete home renovation. Their 1,400-square-foot house was transformed into a 5,500-square-foot mini-mansion. Recently, the couple made headlines when it was reported that their home is near foreclosure because of their alleged frivolous spending. Money expert Loral Langemeier paid them a visit to find out the real story.
"Some of the media reporting said that you were given 25 years worth of taxes," Loral says.
"We had no cash," Milton says.
"You were told that your taxes weren't going raise, and they rose to what?" Loral asks.
"About $5,000 [for the year]," Milton says.
Loral outlines their situation: The couple has accumulated $450,000 in loans borrowed against the house, and as a result, their mortgage, which once was $1,000 a month, is now $3,000. Their taxes have remained the same, although it's costing the couple $6,000 to maintain the house every month.
"Everyone in the media says you're millionaires," Loral says. "Are you? Were you ever?"
"Never," Milton says.
"What were your mistakes?" Loral asks.
"Not having the right people in my corner," Milton says. "We're definitely here for help. I'm trying to move forward, put everything else behind."
"How did you get in this pickle, in your view?" Dr. Phil asks. "You did take out loans against the house?"
"We refinanced," Patricia says.
Dr. Phil points out that the couple refinanced three different times, for the amounts of $125,000, $175,000 and $150,000. "What were they for?" he asks.
"It was for businesses," Milton says. "I have sons, and I was trying to build something for my family, my sons, and it just didn't work out."
"When you have a home, it is a homestead, and creditors can't come after it, other than the mortgage lenders. But, if you take a second [mortgage] on that home, then all of a sudden you waive that exemption, and that house is in play," Dr. Phil explains. "You can go borrow $10,000, secure it with your house, default on the loan, and they can take the house."
Loral adds that Milton already had a working business, and that he and Patricia have thrown away many of their financial records, necessary to track their accrued debt. "We've got to uncover that and really go back to those loan values, and I think the big question, Dr. Phil, is do they want to stay in this house or not?" she says. "That's a big decision."
"What do you want people to know?" Dr. Phil asks Milton.
"We didn't go out squandering money. We didn't [buy] Range Rovers and all this other stuff. We were just a basic family; very humble, very happy. We just didn't take the right steps," he says. "A lot of that money, we lived off of."
Dr. Phil addresses Loral, "You think, if you can get some information, you can kind of figure out what the strategy would be to keep the house, if that's what they want to do, and how to create the income necessary to sustain that house."
"We've got to look at that. We've got to look at credit card bills. Really, I want to identify that $6,000. Is that really the amount? We want to line item that. Again look at the spending habits," she says. "Then, I want to go back and look at the income side." She points out that Patricia is currently working and earning $300 a week, but she feels Patricia could be making more than that. As for Milton, who has tried to start a number of businesses, Loral says, "We've either got to get a business plan for the security business he had in the past, or move on to get a job. We've really got to evaluate this income situation and whether they're going to stay."
"I believe that we just did what we were supposed to do for our family," Patricia says, as she covers her eyes and cries.
"As a man, I have to take the bulk of this, because, basically, Patricia didn't want me to do half the things that I've done. She was a little bit against it, but she stood behind me," adds Milton. "I was just doing everything that I thought I could do for my family, but instead of me pushing the business that I had already " which we wouldn't even be sitting here right now had I done that " but I tried to do other things.