I bought a house on a one-way dead-end road. I don't know how I got there.
- Steven Wright
The changes in the lives of us in my household, starting August, 2006, have been incredible and expensive: we bought a house; my son was diagnosed with Autism; the banking industry gave a frightful public display that Gordon Gecko wasn't completely correct and greed really isn't that good; I was working for a bank so I got laid off and went unemployed for 4 months, eating all our savings; I got a job finally which rewarded me a 30% pay cut. And here we are.
When you're at the end of your rope, or your last dollar, something's gotta give, they say. So what gave? The mortgage payment. Sorry you silly, greedy bankers. My son is worth a hundred of you sleazy fuckers, and you got a bailout. We didn't.
We retained a real estate specialist who no longer sells real estate – he and his wife now specialize in steering homeowners like my wife and I through this insane process of ridding ones' self of a mortgage and a home. Note that ridding one's self of a mortgage comes with an unfortunate side effect or two: you can't keep your house of course, your credit is destroyed for 3 to 10 years, and everyone thinks you're a loser.
This, gentle reader, is the joy of modern home ownership, the last remnants of the American Dream. I have already blogged up a shitstorm of cheery, long-winded depictions of the developers, realtors, builders, mortgage brokers, lawyers, and bankers who gleefully explained what a great time it was to buy a house, mortgage rates are lower then ever, you won't take a hit in Charlotte, North Carolina because there was never a bubble here! Buy! News flash: we fell for that bullshit and here we are. On to the latest updates, because the gears are turning a little faster these days.
We submitted the paperwork (5 times – you cannot accuse mortgage service companies of intelligence) to obtain a “HAMP“ loan - that's the "Obama modification" that has turned out to be a complete failure, as it makes everyone happy but homeowners. Beware presidents bearing good financial news.
We didn't qualify because I make too much money. Never mind my son's needs.
Now we are amid the fun and games of step two - the "in house modification" loan. This means the following: the bank looks at its need for profits, and since I can qualify for the loan they take the full principal, add in the legal and late fees from the foreclosure process (and, oddly, they add missed payments above and beyond the principal - how is this legal?), then they reduce the interest to about 4% and stretch it all out to 40 years.
Let's talk numbers: my $260,000 mortgage balance will now have a principal balance of $290,000 - $300,000, and it will be paid off when I am 87 years old, should I live that long. By the way, the house is currently – and optimistically – estimated to be worth about $195,000 to $205,000.
How does this help? Ah, sorry. It doesn't help *me*, it helps *the bank*. I forgot. Fuck me. They're the ones who need the bail out. Trickle down, all that.
So we will refuse their offer, and then it's the last two steps. Step three: short sale. The realtor we hired to help us through all this fun will list the house for 90 days at about $225,000. If an offer comes in (unlikely; there are 5 other homes currently listed for short sale in my neighborhood alone) we update the mortgage service company, who can accept or decline. I hear they almost always accept, because at that point it's their best bet. Remember: they cannot reduce my principal, that would mean a loss, but they can accept a short sale, because...that would mean an identical loss with a new buyer. It's the new math. I must be old math.
And if there is no offer, and the short sale fails, we go to step four: the Deed in Lieu of Foreclosure. This should happen about some time in December, and it can be tricky. The banks first openly attack with a foreclosure bill for about $30,00 to $50,000 for "fees, past due payments, and services", which we decline and make a counteroffer of $0 and the deed to the property in return. It costs the bank a lot of money to make a foreclosure happen, so negotiations ensue. Eventually an agreement is reached, and we surrender any claim to the deed to the house, then we scamper off and become renters. Hopefully, we scamper away with only a small fee to pay.
Meanwhile, my credit takes a hit, but that hit does not say "foreclosure", it says “deed in lieu of foreclosure”, so it hurts less. This can matter a great deal later on.
Freddie Mac and Fanny Mae, those trustworthy organizations which approve mortgage loans for homeowners, did not die as they could have when the ax fell on this country's mortgage business. They live on, and despite the fact they are intellectually and ethically the least able to be empowered with the task of underwriting loans, they still do just that, as it is evidently necessary for the fox to run the hen house in this whole sloppy business.
If you have a foreclosure on your credit report, these organizations essentially blacklist you. There's no rulebook I can find, and the math they use to do it is every bit as arcane and idiotic as the math these scumbags used to get us here in the first place. Suffice it to say it could be two to five years post-foreclosure before one can buy a house again, and it could be as many as ten. Credit scores, size of down payment, all that factors in, of course.
Outcome: we will rent for a long time.
Lately, there are organizations and services out there which claim you can get your house from the banks for “free”. Seems there are huge gaps in the paperwork filing and chain of information processes for mortgages, and if the banks involved make a major enough mistake in the paperwork a judge can rule the home was never sold on a properly executed contract, and award the entire house to the buyer.
A “forensic loan audit” can uncover these things, and the number of firms (mostly realtors with little left to do but fleece their customers in a new, more inventive way than before) performing this service seems to double every day. Problem is, this process is not only uncertain, it is invariably expensive: up to $5,000 or more up front, and this includes a down side: if no issues are discovered you must pay the five grand AND possibly continue to suffer your way through a foreclosure. I investigated these guys a bit, and as it always sounded too good to be true, it took no time at all to find evidence that it is just that. Google it. It's an amazingly slick way to get fucked over.
Here we are, entering the fifth month of negotiation, filling out the same forms over and over again, talking to a mortgage servicing company who is as interested in helping us as they are in lighting themselves afire; unless, of course, there is a profit in there somewhere.
There is no heart in the housing market any longer: there are those who bought before the ax fell, and those who bought after. We bought after. So did a few million others, convinced as we were that this little burp would pass, that it might take a year but those housing prices would stabilize, because hey: they always did, right?
Among a host of other painful problems experienced by common, everyday people, the business of building, selling, and funding homes remains mired in the same murk it has been for the better part of four years now. That does not stop the gears from turning, however: they turn just as they always did, with not but a hint of desperation in the threatening grinding and squealing sounds the fantastically mindless mortgage banking machine makes these days.
Turn on your television and wait – soon enough you will find a commercial from the National Organization of Realtors. An attractive, stern-looking yet smiling woman walks sanguinely in front of a big salt box house, white with black shutters, the iconic picket fence surely present behind her. Confident, she smiles as she walks. She seems serene. Then she says it:
“There has never been a better time to buy a house.”
This very commercial was on the air in 2006, when we took the keys for our home. It was on the air the following year, when the market had already been trough a small uptick, but prices were already dropping and the news was getting worse and worse. It was probably on the air at one point or another as Cramer was on CNBC making his wildly bizarre claims that everything was just fine, just fine, Lehman can't fail, it's just too big.
And it was on the air just last night. There has never been a better time to buy a house, we hear. It has to be true, or the developers, the builders, the bankers, the realtors wouldn't say it, would they?
Never a better time to buy a home. Like the time in the near future when I hand my keys over to someone and walk away from this place. Two years from now when the yard is all but weeds three feet high, and the windows are glazed over with the patina of dust that somehow makes abandoned homes look so old and tired – there is a house right next door to this one that looks that way already. Another right down the street. Mine will join them.
Never a better time to buy a home. Interest rates are low and these places are going cheap...but they cannot go cheap to the people currently occupying them for whatever ludicrous, byzantine reason. Better for the banks to lose twice than not at all, I suppose; all the better to secure a way to demand another bailout.
Never a better time to buy a home.
Thanks. I'll remember that.