Monday, August 9, 2010

To Big To Fail -- My failed attempts to refinance


We are extremely fortunate. My husband and I have jobs. Good jobs. We have a big house. We can pay our bills. There are so many who have had to endure so much more suffering during this recession. Our little frustrations pale in comparison.


We live in Michigan -- the pit of despair. Specifically, Southeast Michigan -- suburban Detroit: the epicenter of the recession.  I work for the automotive industry: the eye of the storm.

Before everything went to pot, we were living in our cute, adorable "first home." We decided it's time to build our big family home. We find this amazing Neo-traditional community with porches, alleys, neighborly neighbors, a quaint downtown and GREAT schools. We immediately sign. We bought our big, beautiful house in July 2005 -- the absolute peak of the housing bubble.

Source: Wikipedia

We paid way more than I ever though we would pay for a house, but we were all assured that houses always increase in value! We were good little homeowners. We put down 20% and got a 30-year fixed mortgage.

When we sat down to sign at the closing, the closer looked down at our paperwork and exclaimed "Oh, my!"

We were immediately worried. "What's wrong?"

"Oh, nothing. You have a 30-year fixed. I haven't seen that in a while! You wouldn't believe the mortgages people are taking out!"

Ok. You think someone would have seen the writing on the wall back THEN?

In 2005?

Before the crash????

Things fall apart

Throughout 2007 and 2008, many neighbors are transferred out of state, or lose their jobs. In 2009, My company tells us to take furlows -- 2 weeks of no pay. We consider it a good deal because it saves jobs.

Our builder goes bankrupt;  our landscaper wasn't even paid. They stop building houses in our subdivision. Many houses are in foreclosure or unoccupied. Prices fall through the floor. No one even knows what their homes are really worth. But one thing is for sure: we are all underwater on our mortgages.

Many people who want to leave town to look for work, or move to a bigger home because their families are growing.  But they CAN'T because they can't sell their homes for the worth of the mortgage.  And the market is flooded with short sales and foreclosures.
Source: Wikipedia

The government promises to help

As we all know, by the end of 2008/beginning of 2009, the housing market was shot. Not just shot -- it was dead. Then the government started passing housing acts. They said they would help us out. All of us had "invested" in our homes, and now had no investment at all. Just debt. We were supposed to get cut a deal. After all, we -- the taxpayers -- had bailed out the banks. The banks were now going to help us out. It's only fair. Riiiight.

I read up on these new deals, and it sounded like we qualified. I gave my mortgage company a call in the spring of 2009.

Mortgage company: "Are you in foreclosure?"
Me: "No."
Mortgage company: "Are you behind on your payments?"
Me: "No."
Mortgage company: "I'm sorry. We can't help you."
Me: "But -- I was under the understanding that you would refinance people that are underwater on their mortgages?"
Mortgage company: "Only if you are under finance distress."
Me: "That's not what the information from the government says."
Mortgage company: "Oh. You'll have to apply through a different department for that. They have a 6 week waiting list for applications."
Ugh.  You are kidding me.  I call the other department.
Mortgage company: "Are you in foreclosure?"
Me: "NO!!!!!"
Rinse.  Repeat.

What I realized later was that the banks were so unprepared to deal with the massive number of foreclosures, that they did not even have a system in place to deal with refinancing for people NOT heading for foreclosure.

To big to fail

So, I gave up on the whole whole refinance thing.  Until more recently.  A few of my neighbors and friends said they had gotten refinances.  Without reassessments of house value!  I also heard that the banks were getting their acts together, rates had dropped through the floor, and the government was putting some regulations in place to help out with the whole process.

Maybe the fates have aligned! 

So, I call again.

After getting through the touch-tone gauntlet (enter the first four digits... now enter the last two letters...), I get to a refinance application agent.  Yahoo!

She punches in my info, and says, "Sorry, you are not eligible for a refinance."
Me: "Why?"
Mortgage lady: "I don't know."
We then go back and forth about the value of my home, and the value of the mortgage.  I explain several times that I figure the mortgage is more than the value of the home, but I don't know by how much, but not more that 125%.  She says the computer is "telling" her that I can't have a refinance, but she doesn't know why. 

Then she transfers me to get "answers." 

I go to touch tone oblivion. 

I'm finally transferred.  And transferred again.  To another refinance agent.  Who has me answer the same questions all over again.

And tells me I am eligible for refinance. 

But... I should not take the refinance. It's not a good deal. I've been classified as a "high risk" refinance and can't get a good rate. 


Miss Mortgage Girl then states, "And according to the computer, your house is now worth *insert a number that is about 40% of what we paid for our house*.   Do you think that is correct?"
Me:  "No. " Cringing.  I then explain about our adorably cute neighborhood with mixed size housing, we are one of the larger homes and we are next to condos.  So if the computer tries to average the value of our home by our neighbors' value, it's going to be out of whack.  I'm also  thinking -- That's gotta be wrong!!!!  Please be wrong!!!
Miss Mortgage Girl says "Well, what do you think your house is worth?"

Me: "I DON'T KNOW. I thought we were talking about a refinance WITHOUT reassessing the value of the home???"

Miss Mortgage Girl:  "Oh, you can do that, too."  She then punches in some more numbers.  "Well, you do live in Michigan.  This still makes you high risk.  I don't think you will want this refinance option either."

Thanks, lady. Ya know -- I woke up one day and POOF!  Someone dropped me in freaking MICHIGAN??? How the heck did I get HERE?  And who put my cute house and cute little neighborhood in the worst housing market around??? 

Ever feel like you are on a merry-go-round and can't get off???

I give up.  I give in. 

This is all a bunch of malarky!!!!

I bailed out the banks, but I'm too high risk to help. 

I pay all my bills, I pay my mortgage, so clearly I don't need any assistance. 

I live in one of the worst hit regions in the country, and work for one of the worst hit industries, and that makes me untouchable. 

Thanks Wall Street.  Thanks big banks. 

Take my money cuz you know I'm good for it, but too high risk to help out.

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CeCe Savage said...

Your situation sounds very American to me. The part of America they don't explain to you. It's the part where if you're new, down-and-out, or super rich, there are systems in place to help you. But if you are a middle-of-the-lane, been-around-for-a-while person, you're on your own.

A microcosm of this is cell phones. If you're new to the provider, there are deals on phones, adding extra lines, etc. If you are rich, they bend over backwards to give you extra perks. If you are poor, they have a pre-paid option where you save money. But if you've been a loyal customer for 12 years (I'm looking at you, Sprint), they've got nothing for you except increases in service charges and barely any reduction in the cost for new phones.

Booyah's Momma said...

It is a little depressing. My husband was on Zillow the other day, and we were shocked at just how much our house had depreciated. Good thing we are planning on staying put for a while.

And touch tone oblivion... is the worst.

Claudia said...

we also had a big economical breakdown in germany - people lost their jobs and especially the car industry (VW, Mercedes Benz, BMW) got hit hard. The politicians did help with a car-scrap bonus and it helped the companies to survive - but now it's going better and they may have to pay it back..

KLZ said...

I have nothing but curse words for those banks, so I will temper myself (somewhat) and say: I wish you health and happiness. And maybe a thug with a crowbar if you need one.

Rachel M. said...

I live in South Florida which was also hit hard. Our condo is now worth 70% less then we we bought it for. Like you we pay on time, but we were not as sensible with our mortage, we got a 5 year arm because we were told we could sell it in 5 years for sure! Well we bought in 2005 and it's been 5 years. Who could have foreseen a 70% drop in value? I'm honestly at a complete loss for what to do. I don't want to foreclose becuase I'm starting to read stories of banks coming after people for the difference so it's a disaster no matter how you look at it.

Mommycrat said...

I have to say, I read your story and thought, that I really would have been you if I lived in Detroit - we put 30% down on our house and are in a fixed mortgage, pay on time and do all the "right stuff" we were advised to do. It would be horrible to suddenly find out that, despite all that, you still get screwed.

I honestly don't know enough about the housing situation in the states to say anything positive to finish this comment - thinking of you.

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