Van Jones and the No Good Very Bad Math

Van Jones has a new piece up over at the Huffington Post Blog entitled Hope for Homeowners.  In the piece, he uses the story of Jaime Gonzalez’s wallet-busting mortgage payments to make the argument that congress must act immediately on reforms which would force the banks to allow home-owners to renegotiate their interest rates.

Do you remember when buying a home was a part of the American Dream?

Jaime Gonzalez does. It was that dream that encouraged the retired state police officer and his wife, a retired nurse, to purchase their home for $150,000 in Oviedo, FL in 2004. With 3 children, 6 grandchildren, and one great grandchild, the house was part of their dream for the future.

They pay $1,493.53 towards that dream every month. Of that, only one hundred dollars goes towards their principle, the other $1,393.53 all goes towards their massive interest rate of 7.5%.

Nice try Mr. Jones, but those numbers, which I’ve highlighted for your convenience, just don’t add up.  Now Mr. Jones, I’m assuming based upon the fact that you posted on Huffington Post’s Blog, that you have access to the world wide web.  The internet plays host to several hundred free mortgage calculators, like this one and this one and this one.

Here is what happened when I plugged Mr. Jones’ numbers; $150,000 for the loan amount, 30 year term (the term length was never specified by Mr. Jones) and a 15 year term at an interest rate of 7.5% into this mortgage calculator:

The closest I could get to finding a term length that would result in the $1,493.53 monthly payment amount cited by Mr. Jones was 13.25 years:

Let’s suspend disbelief for a moment and accept that a bank would give Mr. Gonzalez a 13.25 year term on his mortgage for the purchase of a $150,000 home in 2004.  I plugged those numbers into the handy dandy amortization schedule calculator and the result:

Eight years into a 13.25 year mortgage,  $1,000.86 of Mr. Gonzalez’s $1,491.25 monthly payment would be put toward the principal and the remaining $490.39 would go towards paying down the interest.

I’m sorry Mr. Jones, it doesn’t add up.