You found me.

This is my mortgage blog.  I’ve been working on it quietly for three months now.  It represents the unhealthy fascination I have for home ownership and my deterination to keep my house, which you can see here.

I know enough to feel very strongly that the mortgage business is a mess and needs reform.  But the way we do reform in this cutlure is by asking generally the same people to simply behave better.  That doesn’t work.  People don’t change.  It takes citizen involvement to make change really happen.  But you need the right kind of citizens — citizens like me, frankly.  I’m curious, skeptical, and talk out of turn.  And I tell you I am determined to make some waves.

Look around please and let me know what you think of the place.

18 Comments » Posted by cringely / Mortgage Horror Stories

A Jumbo mortgage is any loan with a balance more than $729,750, which puts it beyond Fannie Mae, Freddie Mac, and Ginnie Mae funding guidelines.  Jumbo loans are for big houses owned by people who are well-to-do, think they are well-to-do, want you to think they are well-to-do, or were once well-to-do.  And jumbo loans are close to dead.

Of the big U.S. mortgage lenders only ING Direct is really pushing its jumbo mortgages.  Most of the big banks still list jumbos on their product list (Chase doesn’t, however, nor do several other national lenders) but hardly any of them are actually funding jumbos.  They almost don’t exist anymore.

Which is very interesting since a heck of a lot of jumbo-sized houses DO exist.  The the owners of those houses are worried.  What happens if their mortgages reset making the house no longer affordable?  What if they need to refinance and can’t?  And here’s the really big one: how can these people afford to sell their houses if no buyers can get jumbo mortgages to own them?  The houses (and their owners) are effectively frozen.

Lucky me, I’m planning to move nowhere, my 5/1 jumbo ARM from WAMU is about to reset, but drops in the LIBOR index and the stronger dollar are actually causing my ARM rate to go DOWN.

That’s for now.  What happens if LIBOR goes the other direction?  Deleveraging.  If the only loan I can get is for $729,750 then I guess that’s the new value of my old house.

Dammit.

8 Comments » Posted by cringely / Mortgage Horror Stories

Actually, we don’t have kill them.  The mortgage brokers are dying on their own, or rather with the vigorous help of the banks.  Tens of thousands of mortgage brokers are currently out of work, their firms shut down, as part of the current financial crisis.

Mortgage brokers are hunter-gatherers who function in the wholesale mortgage ecosystem.  They bring supposedly qualified mortgage applicants to the big banks and lending companies and somehow are able to get us through the loan process for less money (to the bank) than if the banks had done the loan directly (called a retail sale).  So for the bank it is cheaper to go through a broker than for you to walk in the door down at the corner branch, which makes no sense to me and only shows how inefficient banks are on that level.

Banks prefer to deal with truckloads of money, not wheelbarrows full.

But if mortgage brokers are so helpful to the banks, then why are they dying?  Because the banks in this financial crisis would rather first kill the mortgage brokers than their own retail operations.  The banks are confident that, when conditions improve, the brokers will grow back overnight like mushrooms.  They’ll give up their barrista jobs at Starbucks and go back to bilking us for thousands in loan fees like they think God intended.

As it is with nearly everything else in this crazy market, then, the wholesale mortgage business is operating the opposite of how it should.  Banks are paying MORE, not less, because they view that as the better way to make more, not LESS, which is of course backward.

Why are we surprised?

But don’t feel sorry for your ex-mortgage broker.  Just order from him or her a vente non-fat vanilla latte with extra foam.

5 Comments » Posted by cringely / Mortgage Horror Stories

Joe Nocera, a financial columnist for the New York Times, two weeks ago busted JP Morgan Chase by revealing that the bank intended to use the $25 billion given to it by the U.S. government not for lending to customers but rather for acquisitions and other stuff. Nocera listened-in to a Chase conference call reported here:

</a http://www.nytimes.com/2008/10/25/business/25nocera.html>

Tough news for Chase, eh? Generally speaking the big banks that accepted $125 billion over the last 10 days don’t intend to lend ANY of it — or didn’t until Nocera’s column hit. His may have been the most valuable — and expensive — piece of financial journalism in history. And as a result Chase is now coming up with a plan to rework 80,000 primarily alt-a mortgages by lowering interest rates, possibly converting some mortgages to fixed rates, or even forgiving some principal. Yeah, right. It’s all described here:

</a http://www.nytimes.com/2008/10/25/business/25nocera.html>

Now we come to the good part. The loans Chase is adjusting are coming primarily from two recent and troubled acquisitions — WAMU (that’s where my mortgage lives) and EMC Mortgage, which was part of Bear Stearns (and is where my mother-in-law’s mortgage lives). To get the spectre of Nocera off its curmudgeonly shoulders, Chase had to announce the workout program this week even though the details aren’t supposed to be ready for another 2-4 weeks. This puts the bank in a very difficult position that it is handling through the simple expedient of….. more lying.

The idea of this program, like the IndyMac and CountryWide programs that preceded it, is to change the terms of troubled loans in order to help homeowners stay in those homes — the idea being in part that foreclosures are more expensive and should be avoided if possible. So these are troubled loans — loans where homeowners have had to have been, at least for awhile, in default. But with only half a program announced, how can we expect mortgage holders to respond? They’ll stop paying, if course, which is exactly what Chase DOESN’T want them to do.

Listen, to be considered for this program, we’re led to expect, homeowners need to be in default. Yet as part of the announcement the bank has strongly suggested homeowners not continue to be in default because that might make them ineligible.

Huh?

You have to have gotten behind on your payments to qualify, but if you get any further behind on those payments, you might then become suddenly UNqualified. It’s as though there is a sweet spot of just enough — but not too much — financial default.

This is hooey and an insult to all involved. If you want to be included it is clear that the best move is to stop paying your mortgage or you’ll never get a chance to participate. And saying that homeowners who haven’t paid their mortgages for 2-3 months are now supposed to somehow find the money just as the economy get WORSE, not better, well that’s crazy and the bank has to know it.

The truth is they intended not to announce anything yet except Nocera interceded (bless him) so now Chase will spread some horse manure on the story in hopes of minimizing the damage. All of which leaves me with the question of where this falls under the Truth in Lending statute?

4 Comments » Posted by cringely / Mortgage Horror Stories

So the Federal Government is pouring $700 billion of OUR tax money into banks and the financial system all with the goal of loosening credit and giving you and me our HELOCS so we can remodel a bathroom.  BUT IT ISN’T WORKING!!!!  Rather than getting easier, it is getting harder — a lot harder — for even consumers with good credit to get mortgages: #mce_temp_url#

Does this make any sense to you?

In one sense you could say that thing like this take time, turning supertankers isn’t easy, yadda, yadda, yadda.  But I actually think it is something else.  I think the financial markets have figured that maybe there is ANOTHER $700 billion that could be coaxed out of the government.  And they aren’t going to stop lending without it.

2 Comments » Posted by cringely / Mortgage Horror Stories