Pregnant with her first child, and with her husband in Iraq, Karilyn Bales took advantage of what seemed like a sure thing -- tapping into their home equity to help stabilize the family's finances.
But Bales and her husband, Robert, fell into the same refinancing trap in 2006 that dragged the U.S. economy into recession and left millions of Americans facing foreclosure.
The arc of the couple's finances can be traced, in part, through public records. Karilyn Bales has declined to be interviewed for this story since her husband was detained then charged in the slayings of 17 Afghan civilians and with six counts of attempted murder.
Records show the couple's financial dilemma accelerated in 2006, when Karilyn Bales refinanced their four-bedroom Lake Tapps home -- and an Auburn duplex she owned before she married Robert -- all on the same day through Paramount Equity Mortgage. With Robert deployed, she signed the paperwork.
The California lender, which Washington state regulators accused in 2008 of deceptive practices, put her into two loans considered "subprime," with high interest rates, prepayment penalties, and balloon payments, records show.
In a statement Wednesday afternoon, Paramount Equity said the Bales came to them "with hefty financial obligations."
The couple's loans, however, were not improper or predatory, the company said. "It's important to note that we do not cause a family's financial situation to get worse. In fact, we are often able to provide the breathing room people need to better manage their money on a monthly basis."
In all, the couple borrowed more than $500,000 as the housing market was nearing its historic implosion. Their homes now have a combined assessed value of $358,000.
The Auburn duplex has stood vacant, without power or water, for more than a year. Meanwhile, the family's Lake Tapps home was briefly put on the market for $50,000 below what the couple paid in 2005 and just days before news of the horrific slayings in Afghanistan rocked the world.
The family's Seattle attorneys have repeatedly downplayed the financial stresses Bales and his wife were facing. They have said they doubt that money problems a half a world away could have played any role in the massacre that unfolded March 11 in a remote village in a Kandahar province. Bales, 38, a staff sergeant, was stationed with the 3rd Stryker Brigade at Joint Base Lewis-McChord.
"From Kari's perspective, it's not relevant to the issue of what happened in Afghanistan," said her attorney, Lance Rosen. "It's a distraction."
But it was up to Karilyn Bales to juggle two young children and the household finances while her husband was deployed to Iraq and later in Afghanistan. Like many Americans, the couple had dug themselves into a sizable hole, records show.
The refinance loans Karilyn Bales signed with Paramount Equity Mortgage were "unconscionable," said Joe Krumbach, former president of the Seattle Mortgage Bankers Association, who reviewed the couple's public records at the request of The Seattle Times. "The margins on these loans are disasters waiting to happen."
Paramount Equity said at the time the Bales owned a home with two loans on it and an investment property, and said "many customers who refinanced their loans at that time chose to consolidate other debts into their mortgage payments. By the end of our work with the Bales, they had one monthly mortgage payment on each property they owned, saving them a substantial amount of money each month. We would not have helped them with refinancing their loans if the outcome had been otherwise,"
Loan documents show the 2006 adjustable-rate loans Karilyn Bales obtained from Paramount put the family deeper in the hole.
The $327,750 refinance loan on the family home near Lake Tapps, for example, was split into low monthly payments over 40 years but was due in 30 years.
The loan was nearly $50,000 more than the loans the couple took out a year earlier to buy the home, and carried a higher interest rate of 8 percent, all of which would have raised their monthly payment due.
Paramount said that while it could not reveal the specifics of the Bales' loans due to privacy rules, the loans made their monthly payments more manageable. "These facts may not be readily apparent from publicly filed documents relating only to a mortgage refinance transaction," the company said.
The Auburn duplex had a $178,500 refinance loan. It was bought in 1999 for about $99,000. The first full payment was due Dec. 1, 2011 -- the month Robert Bales left for Afghanistan for what would be his fourth combat tour.
Exactly why they took out the loans from Paramount is not clear, especially given the couple's rZsumZs.
Before joining the Army, Bales worked as a financial adviser in Ohio and for a short time in Florida. However, in 2003, an Ohio arbitrator found him and his boss responsible for fraudulent trading that cost an Ohio couple nearly $1.2 million. The firm he worked for was later closed by the state.
Bales was never charged, nor did he ever attempt to repay the couple.
Meanwhile, Karilyn Bales worked as a project manager at Washington Mutual and might have qualified for a home loan there.
(Seattle Times reporter Hal Bernton contributed to this story. Contact reporter Sanjay Bhatt at sbhattseattletimes.com.)
(Distributed by Scripps Howard News Service, www.scrippsnews.com)