Many Hampton Roads families financially ruined by Chinese drywall

Many Hampton Roads families financially ruined by Chinese drywall

Source: Daily Press (Newport News, VA), October 10, 2011
Posted on: http://envfpn.advisen.com

Eric Bailey became so frustrated when moving out of his Chinese drywall-contaminated home in Denbigh this spring, he took out a Sharpie pen and scrawled messages on his gray walls.

“Chinese drywall brought to U by U.S. trade policy,” Bailey wrote in thick black ink on his living room wall.

Bailey said the home in the Hollymeade subdivision in Newport News was his “dream home” when he purchased it for more than $250,000 in 2006. Now, it’s in the process of a short sale, an alternative to foreclosure that allows properties to be sold for less than the amount owed on the mortgage. Bailey is selling his property for $80,000 to an investor, but his credit rating will still be damaged.

“I had $80,000 of my own money invested in this home,” said Bailey, flashing a thin smile. “I don’t expect to get any of that money back.”

Meanwhile, his credit is ruined for two years or longer, depending on his finances after the two years expire.

But Bailey’s situation is less dire than that of Juanita Smith, whose Hollymeade home was foreclosed upon this summer.

She’s now $200,000 in debt, and the bank could seek to recover about $140,000, the difference between what she purchased the house for, and what it sold for at auction. She doesn’t know if the bank will try to recover the $140,000, but if it does, she said she would have difficulty making the payment.

“All I know is, the train is coming,” Smith said, worrying about having her wages garnished or other financial problems that could push her into bankruptcy. “I have hit rock bottom.”

What happened?

Bailey and Smith are two of many residents throughout Hampton Roads dealing with financial problems resulting from Chinese drywall contamination.

The defective drywall emits foul-smelling gases that residents say have caused health problems, corroded wires and damaged appliances. About 400 homes in Virginia, most in the Hampton Roads region, and thousands across the United States, have been contaminated. Most of the properties were constructed during the building boom in the mid-2000s, when American-made drywall was scarce.

Many residents, including Bailey and Smith, left their homes, complaining of the pungent smell and subsequent health problems. Some have blamed the gases for asthma and severe headaches.

“I was just fatigued, tired all the time,” Bailey said. “I would come home from work, crash and sleep until the morning.”

Both Bailey and Smith moved out of their Hollymeade homes, and are now renting apartments in Newport News. Many who were renting and paying mortgages at the same time were unable to do so for long, leading to a rash of foreclosures and short sales.

Bailey said he estimates about half of the 37 homes in Hollymeade affected by Chinese drywall have gone through or are in the middle of foreclosures or short sales.

“I still feel blessed. I’m not homeless or on the street. I still have a job,” said Smith, 63.

Still, her plans for a debt-free, travel-filled retirement have vanished.

“My finances are ruined. I don’t think I’ll ever purchase a house again,” Smith said.

Both Smith and Bailey said they threw away most of their possessions because the items became contaminated with the drywall gases.

Drywall solutions

Colleen Stephens, a Virginia Beach drywall activist who is also in the process of short-selling her house, said those affected have been pushing for solutions from the government for two years, but no substantial help has been forthcoming.

“We held out for as long as we could,” Stephens said. “People eventually had to make decisions and get on with their lives.”

Those decisions have been painful, Stephens said. Responses and actions as the Chinese drywall crisis has unfolded over the past few years include:

— Homeowners learning insurance won’t cover Chinese drywall claims, as insurance companies deemed that the gases were excluded from coverage. Some who tried to file claims were sued by their insurance companies.

— Lawsuits were filed against the Chinese companies that made the drywall, including a successful class-action suit in federal court in New Orleans. But collecting awards from the companies has been difficult.

— Some homeowners were granted forbearances on their mortgages for a few months, but interest still accumulated during the forbearance period, leaving them in the same financial mess when the forbearances ended.

— Local governments reduced assessments so that local taxes would be lowered.

— Chinese drywall can no longer be imported, according to a new Virginia law.

— The Consumer Product Safety Commission has issued guidelines on how to conduct drywall remediation, and there is now some help in the federal tax code for those who do remediation. But no government money is available to help pay for the remediations. With families strapped for cash, activists say, most can’t afford the hefty price tag for the renovations. Drywall advocates say some estimates to do remediation cost more than $100,000.

Congressional action

Now, activists are asking for help in other ways, including restoring credit ratings to what they were prior to short sales or foreclosures.

“My credit is destroyed,” Smith said. “I want my good name back.”

On that point, U.S. Rep. Scott Rigell, R-Virginia Beach, and U.S. Rep. Robert C. “Bobby” Scott, D-Newport News, agree.

The two local Congressmen have joined the “drywall caucus,” a group of representatives asking for a hearing before the House’s financial services committee to discuss credit ratings and other potential solutions. Rigell recently spoke on the House floor about the Chinese drywall crisis.

“I’m seeing more and broader support for this,” Rigell said this week. “This is a big deal. This is an injustice. We’re not letting go of this issue. Some of this is just too unfair.”

Scott said there should be protection for those suffering because — through no fault of their own –their homes became uninhabitable.

“People ought not to have to go through this,” Scott said.

There might be some legal issues to work through about how to restore credit scores, Rigell said. But he’s hoping that the credit rating agencies will recognize the problem and voluntarily provide a pathway for people to restore their credit sooner than through a typical short sale or foreclosure.

When asked whether a law could be passed forbidding banks from attempting to collect on money owed from a Chinese drywall-related foreclosure, both Rigell and Scott said that would be hard to do.

Scott said foreclosure forgiveness could have been a string attached to the federal bank bailout three years ago, but it’s too late to do that now.

Scott said perhaps a federal disaster relief fund could be set up to help people whose homes become uninhabitable through means other than natural disasters. But Scott also said that in the fiscal climate the government is in right now, that would be a tough sell.

The United States could impose a tariff that would perhaps apply to building materials sent from China, Rigell said.

But Scott said he can’t see how the United States could slap a tariff on China when we owe them “billions.”

“We’re not in a position to be in hard-nosed negotiations with the Chinese,” Scott said.

Both Hampton Roads congressmen said an “all-hazards” insurance should be made available to the public, with no exclusions, so that if for any reason your home became uninhabitable, it would be covered. But that would affect future unforeseen problems, and wouldn’t help those already affected by Chinese drywall.

Meanwhile, residents affected by the drywall crisis are left to pick up the pieces.

Bailey said the experience has changed his outlook on life.

“I’ve decided less is more,” Bailey said. “I was always looking for the bigger house, the bigger TV, and at the end of the day, it’s all just stuff.”

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