Thursday, April 10, 2008

Loan Sharks

How, how, how in the #%&@ is this supposed to help?

Foreclosure Bill

I understand not rewarding irresponsible buyers and even more irresponsible lenders, but wasn't the original purpose of this bill to be to aid people who simply got caught in the cogs of this mess?

Seven years ago, my husband was self-employed and we didn't have enough credit to impress a bank. The fixer-upper we'd bought for next to nothing was eating us alive. A realtor/friend showed my husband the little place we're in now and we fell head over heels for it. The owner was having trouble selling the place so they offered to owner finance it. We jumped on the offer, sold the other for a little more than we had left on the note and and moved in.

We love this place. It's an older "stick built" modular (meaning it's a house that was brought in on a trailer and set on a foundation) with two add-ons and a deck, sitting on three partially wooded lots, within walking distance of the lake (second tier up), surrounded by trees, with no close neighbors, good roof, warm, comfortable. We converted the garage to a bedroom with a walk-in closet, added on a mudroom and some storage space, redid the little kitchen and replaced all the subflooring. We have three bedrooms and two small full baths.

A year ago my husband I decided to try and refinance our home in order to do some repairs and add on another room and consolidate some debts. Our credit was good (not great, but good),we had plenty of equity in our home, the same realtor gave us a ballpark figure as to our home's value which had ballooned since we'd bought it, in part because of improvements we'd made and partly because the market had exploded. I researched the market carefully and did a careful cross comparison of places like ours. Then we went to a local bank, which was, incidentally, recommended by the realtor.

We spoke with the loan officer who I will call Sharky from here on out. Stockbrokers and bankers all seem to have sold their souls to the Shark Lord in the sky. If you look into their eyes, you'll note that they don't reflect light; they're just dull black marbles. Sharky kept pressing us to consider a variable interest rate. My husband was adamant though. A fixed interest rate, even if it was a little higher, was the way to go.

Sharky ran our paperwork through, we were approved pending the appraisal. He called us up to announce the good news (You have pretty good credit, he said sounding surprised) and once again tried to slide the variable interest rate past my husband. No, said my husband. Thanks anyway.

There was some back and forth stuff, paperwork to be filled out and so on. We spoke with the man again and again he brought up the variable interest rate and again, we said no. We killed ourselves to get ready for the appraisal and spent money we probably shouldn't have trying to pretty it up more.

The bank sent out the appraiser. We followed her around, showing her what we'd done and what was in progress. She told us as she left that she felt good about what she'd seen. She also told us she knew how much we were hoping for.

The next day a "disappointed" Sharky called up and told us that she'd called him to tell him that she wasn't going to finish the appraisal because it wasn't going to appraise for anywhere near what the bank was hoping for and that she didn't want to cost us money. We asked if they could send out another appraiser and he said, no that was the only one they did business with.

We were deeply disappointed and terribly confused. We thought we'd done everything right. The real estate agent/friend was furious for our sakes. He called Sharky up and bawled him out, bless his heart. I did a ton of research about appraisers and learned that the woman had done a slipshod appraisal (didn't even look under the house) and should not have had access to the information concerning the hoped-for amount of money. An online forum set up for appraisers to dialogue with the public and with each other told me we had grounds to sue or at least call her ethics into question with the licensing board. My husband commented that the woman looked too much like the banker for his comfort and he's wondered ever since if there wasn't some kind of small town back-scratching going on.

We discussed trying another bank, but my gut feeling was that we should sit on it for a month or so. I just had a strong feeling we'd been told no for a reason.

A month later, the factory my husband had worked at for six years began cutting hours and laying off employees. Suddenly we were struggling just to feed ourselves. We went through six months of financial hell as he looked for and found a better job that meant a temporary losse of income. We're still bailing (though we never missed a housepayment, nor were we ever late). Our credit took a substantial beating because sometimes it was a choice between feeding kids and paying creditors and the kids are noiser when they're hungry. His new job is bringing in more than we've ever seen, but it's been a long haul and I expect it to be a couple of years before our credit score improves. I'm not proud of this at all, but we're certainly not alone.

What would have happened to us if everything had come together and Sharky had talked us into his variable interest rate? I have a pretty good idea we would have looked a lot like two of my brothers who both lost their homes last year. One was laid off by the same factory my husband worked for. He'd said yes to a low teaser rate for the first few months, and a variable interest rate for the rest of the year, with the understanding that he could refinance for a fixed interest rate after the first year. He was careful-had one credit card he was paying the balance off on every month, he'd been employed by the factory for two years, he had money in savings, he was proud of his home and his life. Then the storm hit. He was laid off, used his savings to live on for two months, and missed a payment, his rates went through the roof, and then even when he did find more work, he couldn't make enough to live and catch up. After several months of fighting, he mailed the keys to the bank and walked away. The other brother's story was similar (with a bit of irresponsibility tacked on) and he tried a lot harder to save his home and found only predatory lenders who refinanced the house for three times more than it was worth. They finally foreclosed on his home. He's moved, found better employment and is rebuilding his life, but he took a big beating. They will both tell you that this was in part their fault.

So, by comparison, we're okay and we only have three more years until the note on the house is paid for so I think we'll just sit tight and ride out the economic downturn. Maybe we'll wait until our credit is improved and buy a better place. Maybe we'll just stay where we are. We're already in a retirement community . . .

When I hear stories about people who've lost their homes, thanks to predatory lenders and banks playing games with the wording in the contracts, or not returning phone calls, or not pushing paperwork through in time, I get angry. It hits too close to home. Have these people made some bad decisions? Some-definitely. And some should have done their homework. But some were lulled into believing that everything would be okay by some shark in a suit.

And the government was going to address this--regulate the banks, get some relief for people who are in foreclosure through little fault of their own. And what do they come up with? Tax relief for builders? Tax relief for people who buy homes in foreclosure?

Why do I get the feeling that if I got a good look at the guys sitting up in Washington I'd find that there was no light in their eyes either.

Somebody needs a bigger harpoon gun.
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