Sunday, March 21, 2010

A Mortgage Odyssey

The closing on our new home is complete, the moving has begun, and the first mortgage payment is due May 1st. Our home search started in the spring of 2009, and completed March 19th 2010. There are advertisements on radio stations that talk of sub 4% rates or quick and easy loans. These ads cite the government programs going on right now. These are all lies. It is not easy, and rates are not that amazingly low. Just ask people in tough mortgages they cannot afford how well HMP is going on. It's a mess, but if you are a patient and qualified buyer, there are opportunities for you.

In the spring of 2009, my wife and I applied for mortgage pre-approval. We were pre-approved for an amount that was 4 times our combined salary. We had a 20% down payment squared away and awesome credit scores. With pay stubs, we documented our monthly income. We were 'crystal borrowers'. This put us on the path of looking at homes. We had a price range that was well below that 4x limit. Our upper range was 40% below that 4x limit. We received letters of approval, good faith estimates, and settled on a home that was about half of that 4x limit.

This is where the lame games began. We declared all of our assets and our one liability. Not just the assets for the down payment, but the assets we had on the side. Assets we will not touch for 35 years were collected and documented. We needed recent account statements. One account statement only said page 1 of 3, despite showing the entire balance and account activity, and they asked for the other 2 pages... that showed nothing but bank advertising messages. When I transferred money from one account at one bank to another checking account at the same bank, I needed to show how it moved. The pages I showed were not enough even though the transfer was in the same bank and showed exact dollar changes. Same bank, same dollar amount, just different accounts, per their instructions. They still needed documentation showing exact transfer.

The most ridiculous part of the process was the final week. I asked for wiring instructions since I could not write a cashiers check for the down payment. They only accepted wires because fraud was so bad in the last few years. I waited a 4 days. Then I was instructed to transfer all of my money into one checking account to make the wire easier. I did this. They then asked for documentation of this transfer. Not just knowledge of the final dollar amount in the checking account. These were their orders, and I had to show how it happened. I had to do it before the final wire and closing, which was 24 hours before closing. They couldnt tell me wiring orders say 2 weeks in advance, nope. I could have wired the down payment from the two banks, but that was not good enough for them. They wanted one location, and these additional wires cost me $25 bucks each.

Final insult was on the morning of the closing. They called me at work; the actual mortgage underwriter. This was to confirm I was still working. My boss was not in so I transferred them to a coworker. Yup, they had a paystub copy from end of February. Not good enough. The mortgage broker told me they would have called off the closing if I had not been there to answer my phone and confirm employment. Couldn't I have been lying about my work number and my coworker? Overreaction maybe. I took a shot at the underwriter on the phone and said "making up for all of those NINJA loans you made in 2004?" She of course said "I wasn't here in 2004", to which I answered "no, of course it was someone else".

The mortgage industry went overboard with their loose rules in the '00s, and to make up for poor underwriting, they are going overboard in the other direction. I actually support the overboard protective underwriting, but little things like the phone call the day of closing is useless. Maybe there was a happy medium that they should have always followed. If a radio ad says a mortgage is easy, it is a lie. They should not be easy. It should be a tough process because these loans involve hundreds of thousands of dollars. If an ad says rates are under 4%, they are selling you a 5-1 adjustable rate mortgage. Yes, those variable rate mortgages, not as bad as 2-28s or 3-27s, are out there. They are still being used!!! Rates are going up. The FED MBS buying program is almost over. What will happen whent he FED stops buying? Jeez I don't know, the mortgage rates will have to go up as demand for those securities will drop. I am happy that process is behind us. Now comes the slow process of paying off the mortgage.

240 payments to go.

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