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"Our lives are a book that has already been written. The brilliance of the plan is that we are only given a chapter at a time..." ~A. Drayton Boylston

Tuesday, January 31, 2012

Subprime Mortgage Hell

I was prompted to post about this after communicating with lawyers and my mortgage company in the past couple of weeks.   I've learned a lot just by heavily researching my options recently.  And I figured this information might help other people out there still trying to hold on to their home.

I bought my current home in 2005, just before the subprime mortgage fiasco really crashed and burned.  At the time, my husband had no verifiable income (he was self-employed but didn't keep good records), so he wasn't put on the mortgage.  If he had been, we would have been in a much better situation since he had the better credit of the two of us.  Instead, after being turned down for financing numerous times, I ended up going through the seller's boss (both the seller and her boss were realtors working for the same company) for financing..... she pulled strings that never should have been pulled because someone owed her a favor.....and I finally got financing.  The appraisal was also fudged because the seller wanted what she wanted for the house.... since she was having a custom home built and needed the money from the sale to finish her new house.  At the time I thought people were trying to help and doing me a favor.

Hindsight is more than 20/20 at this point.  Although mistakes were made by other people, I could have chosen to back away at any time and I didn't.  I do regret that in a way.  But being the stubborn person I am, I didn't back down and was determined to get the home I wanted.  My sister had purchased a home one year prior, and I was a little jealous that she and her family seemed to be happy in the new place.  I wanted a place I could be happy in too, and I was tired of paying $1100 per month to rent an apartment where residents were constantly complaining that I was walking in my own kitchen after midnight. Back in 2005, people were buying homes left and right.... because it was easy, and it suddenly didn't really matter how good your credit was or if you had money to put down.  I wasn't even told what type of loan I was in.... and I didn't understand that it was a bad thing.

It seemed that from day 1, the home my husband and I shared caused us nothing but problems.  It started with the mortgage company calculating the payments incorrectly and doubling them for the first few months.  So payments weren't $1600 per month for the first and second mortgage combined.... they were over $3200.  I ended up finding the error in the loan documents, where the yearly tax estimation amount had become my mortgage payment amount (down to the penny) from probably a data entry mistake.  Thankfully I was able to prove this and get it corrected before too many months went by.

But I was still the not-so-proud owner of a two bedroom townhouse with TWO adjustable rate mortgages  at 11% and 9% interest.  And just as I had braced myself for..... 2 years later the shit hit the fan.

Right on time, the mortgages adjusted to an unpredictable and unsettling rate,  my husband became unemployed, and my Grandfather (the financial helper for the rest of my family) died of lung cancer.  Emotions were high to say the least, and I was trying to do the best I could to support us both, as my husband couldn't collect unemployment since he was self-employed.  It was that time that I realized my mortgage payments were too high for just my income.  And neither of us anticipated a crisis, like a loss of employment would effect us.... especially considering he was promised lofty rewards for his efforts.

We decided to try and get assistance from an organization called NACA (Neighborhood Assistance Corporation of America).  We sat in on their positive and encouraging seminars, and learned all we could about the organization and how they could help us.  We filled out all the financial paperwork required to get a meeting with one of their counselors.  When we finally managed to get an appointment that we waited almost a month for, the person we were supposed to meet with never showed up.  I filed a complaint, and a meeting was set up again with the same person almost a month later.  When we got there basically the only advice we got was to stop paying our mortgage and to keep trying to extend the foreclosure date so that we could save money.  Then after two years, NACA would help us get another home.  It was a 15mn meeting that was a waste of time, and something we shouldn't have had to wait almost two months to hear.  What we were expecting and needing was not to take the irresponsible way out..... but to have someone work with our mortgage company to get the better deal we should have gotten in the first place.  After all, NACA was battling all sorts of big time offender banks in the subprime mortgage crisis.... and causing them to give owners better deals on their mortgages.  But not mine.... my mortgage company was a SERVICER, which they couldn't work with.  I finally learned that I didn't fit into NACA's criteria for assistance.

After numerous calls and pleading with my mortgage company, they changed the two loans from adjustable rate to fixed rate, and lowered the interests rates to 8%.  Not great, but still better than owing an unpredictable amount from month to month.  I can safely say that I've borrowed money from every loan company around... good and bad.  Citifinancial, Quick Click, Cash Call, Prosper, OneMain, AdvanceMeToday....and a bunch of other payday loan companies that make you feel like they would hire someone to break your knee caps if you fell behind.  I know the great ones to deal with, and the nightmares.  And I can't say I'm proud of that fact.  I borrowed to avoid some arguments and to let on that everything was ok.  I borrowed money from loan companies to pay off OTHER loan companies.  I did it just to keep us afloat.  It took me a while to break that cycle.

Arguments about money and how much my husband hated the house became a daily thing.  Tempers flared and the focus was not on each other, but how to survive from month to month.  A $104,000 per year household couldn't afford the roof over their heads.  Before moving into the house, we were happy.... but I can barely even remember those days now.  It is now 2012, and we are separated and dating other people.

I went to Rhode Island about a month ago to visit my Dad, and we were talking about my mortgage situation.  He mentioned how startling it was to him that I managed to hold on to my home for this long..... because most people who got into my situation abandoned ship a long time ago -- they either did a short sale or went through forced or voluntary foreclosure (including my sister.... whose home I was envious of).  Then he said, "It seems like you're one of the last subprime mortgage holders....there has to be help out there somewhere.  Why don't you chase after the `Obama thing'?"

The `Obama thing' wasn't easy to chase after.  In order to be considered, I had to fill out financial forms online, and submitting them to my mortgage company seemed to cause my phone to ring immediately off the hook, with my mortgage company demanding their payments more aggressively.  So I had given up for a while.  But after suddenly going from two incomes to one, I knew I had to ramp up the research efforts.

I found links online to both Obama programs, and was contacted immediately.  Despite their friendliness and willing to help, I was told that there was currently no help for people whose loans were NOT backed by  Fanny Mae or Freddie Mac. The good news I guess is that most people have either Fanny Mae or Freddie Mac loans.  However..... my loan is oddball and I am sure there are others still out there who have similar bad mortgages.  So one piece of advice I would give to those who do not yet have a mortgage is MAKE SURE the loan you get into is a Fanny or Freddie.  I have to say that I am surprised there is currently absolutely no government help out there for oddball loans.

I was told by the government people that my ONLY option aside from trying to work with my mortgage company, was to hire a loan modifcation attorney.  They sent me to this site to find companies willing to work with me:  http://www.quickenloans.com/ .  However, you really have to be careful who you decide to work with..... RESEARCH the law firm or company.  Make sure they are part of the Better Business Bureau and see if there are any complaints about them online.  THEY WANT A LOT OF MONEY, so you have to decide whether that money is worth handing over, and what you stand to gain or lose as a result of your relationship with them.  Many of them present attractive points.... stating they can lower your interest rate down to 1%, that you don't have to pay your mortgage while you're working with them, that your payments to them can be in installments, and they have a high success rate.

However.... think about this.... they cannot guarantee you ANYTHING for your money.  You are paying for them to file paperwork and bug your mortgage company.... but your mortgage company can still foreclose on you if you don't pay.  If you have the money to pay a lawyer, chances are you'd be better off just making a payment to your mortgage company and buying yourself more time to figure out your finances.  If you do decide to work with a loan modification attorney, my advice is to keep paying your mortgage at the same time.  If its one thing I've learned over the years, its that if you try the best you can to remain current, your mortgage company is more apt to work with you or whoever you hire to represent you.

So I started thinking, "Why hire a lawyer when I could just try to work with my mortgage company?".  I contacted the Ombudsman services at my mortgage company (Select Portfolio Servicing), and at first they were not very helpful.  They said that according to their criteria, my loans were considered "affordable", despite being ridiculously high for the type of home I own.  Their criteria includes ONE thing..... gross yearly income.  This is NOT the money you actually get deposited into your bank account..... it is a grand picture of the salary you don't actually get.  I get over $600 taken out of EACH paycheck for 401K, 401K loans, commuting expenses and health insurance.  My debt is not nearly as high as it was even 5 years ago....but I still have graduate student loans and three credit cards.  Not to mention utilities and food.  So my gross yearly income is an awesome wet dream compared to the income I actually take home every two weeks, that I count the days until I receive and which doesn't pay all my bills.  Like a lot of people, I am part of the ever-increasing group called "The Working Poor".

It took a lot of persistence, but I managed to get my loans modified for the second, and probably last, time.  They are now down to 4% each.  Finally, after 7 years, my mortgage is nearly affordable and makes sense for my income.  When I told my husband, he said "Its a shame they didn't do that years ago, we might still have a chance at staying married."

I was also told by my mortgage company at the time that my options were exactly the same if they worked with me or whether I hired someone (such as a loan modification attorney) to work with them on my behalf.  So I learned that it is better to bug your mortgage company yourself rather than work with someone else at a high fee.

My plan now is to rent out my spare room, so that I can start building up my retirement savings again. And at the exact moment when my loan is paid down to the point where I am no longer upside down (oh, by the way, my home is only worth $100,000 and my loan is paid down to $160,000 from $175,000), I will sell the house and get on with my life.  In the meantime my home is more like a prison that I look at as a temporary place to sleep while I am still allowed to.

I neglected to mention earlier in this post.... but I also cashed out all but $15,000 of my 401K.  Twelve years of savings, just to pay off debt and get back to a manageable financial life.  The $15,000 would have been cashed out too if not for being tied up in 401K loans with Mercer.

My home has been one big money sink and has ruined my marriage beyond repair (of course there were other factors, but it was a big thing).  And it was all for the dream of owning my own home, and not "throwing away" hard-earned money by renting.  My husband and I thought of it as a temporary "Starter Home"..... but we quickly learned it had to be a nearly lifetime residence because we were under water.  I was also worried about ruining my credit with foreclosure or a short sale. I would be 47 by the time I could own a home again.

If I'm glad about one thing, it's that my husband was lucky enough to walk away without legal obligation to the house.  I am glad that he can get on with his life without any negative financial ties.  He can be responsible and save for a down-payment, and buy a place so much better within a few years if he really wants to with a future girlfriend or wife. And he is young, so he can still have a family.  I'm glad that at least one of us can.

And after all that, I am still one crisis away from losing it all, which is what I've tried so hard to avoid from the beginning.  I look around the house, with all its problems and I have to wonder if it was all really worth it.  the basement that was supposed to be completely finished before we moved in but wasn't..... the leaky pipes and the hole in the kitchen ceiling..... the dead washer and dryer.... all things that need to be fixed and replaced.  My mortgage may be modified to an affordable rate now, but it still means that I need to come up with money to take care of what needs to be done and hire people to do the work that my husband had planned on doing eventually.  And the money ain't gonna grow on trees!

I made a lot of mistakes, but unfortunately I can't take them back.  If I had it to do over again, I would have: saved money for a down-payment, taken more than a few months to look at homes, taken the hint when I had gotten refused financing and instead worked on my credit to ensure I got the best mortgage deal possible, and backed away from anything that seemed shady in any part of the process.

I would also figure out what's more important to me.... a house or a life.... before it was too late.  But now it IS too late for me, and I'm just trying to do the responsible thing and hopefully repair my credit so that I can own something I can be proud of before I die.  And the prospects of that happening seem pretty grim right now.  Throw in the feeling of being scared, lost and alone since I am on my own again for the first time in ten years..... and that's the misery that is my daily life and probably will be for a long time.

I think of my Grandfather, who passed away in 2007, and all his peanut butter jars filled with pennies, that literally poured out of his closet when we cleaned out his apartment.  He was saving money for his family.  It's a shame that in one of the wealthiest countries in the world, dreams have to be put put the back burner and are so far beyond the grasp of most people.

Now if you'll excuse me, I have to get back to my cell.

Good luck!

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