The home stretch
After doing our final house inspection and signing loan documents yesterday, it's a natural time for reflection on the entire home buying process. Who am I kidding? We've done nothing but reflect for the past four months. The actual and symbolic significance of buying this house are clear, both in the comforts it will afford the family and the calm it brings my soul.
If we were self-important or delusional enough to feel inclined to name our home in the tradition of colonial estates, I think this house would be called Kismet Manor. I've written previously (and spoken even more frequently) of the amazing good fortune we had in visiting the neighborhood the day we did -- back on April 1. I recall the specific segment of road on which we were driving and the color of the sky when I suggested we "take a drive by Cantara and see what we liked so much about that house." If I had never put that offer out there, or Lori protested, or the kids got cranky, or it was 30 minutes closer to dinner, or I had weekend work to do or it was raining...anything...we wouldn't have discovered the final phase of the development opened three weeks ahead of schedule and gotten the jump on the universe in selecting our lot. Lori and I still marvel at that galactic gift.
But now, on the closing side of the affair, another case of good luck has come our way. Our mortgage broker has been tinkering numbers for us for two or three months. We were always inclined to use Lennar's mortgage division, having succumbed to the seduction of the flooring incentive dangled so carrot-like in front of us. The numbers calculated back in May were pretty encouraging. If we bought two points down on our primary loan (we're doing an 80-10-10, 30-year fixed), we could get a 5.875% rate. But, unable to lock in anything until 30 days out from closing, we soon determined that those original good faith estimates had bad mojo working.
The heat of the summer set the suspicion stewing in the subprime lending market to boil. When our thirty-day milestone arrived, our mortgage guy, Carlos, informed us that rates were going up. Dramatically. With some coaching from him and bookmarks of key market indicators, we spent two to three days waiting to pull the lock-in trigger. Waiting for the CPI report to come out one Tuesday or Wednesday, Lori and I watched the tickers on CNNMoney.com fluctuate and oscillate. Like homeless people ogling slot machine wheels. "Come on 10-Year Bond, Daddy wants a low yield, now. Come'on big four-point-nine-seven! Stop, you sunnuvabitch!"
Once we hurriedly submitted paperwork to lock in our rate (deciding on paying one point and getting a 6.75% fixed rate), we thought all was good. But in the few weeks that followed, as we waited for the title company to come a'callin, there was trouble in the air. Lori's soothsayer superstition that forbade her to believe the house was ours until we signed on the bottom line was becoming seemingly more valid.
After a few Eggo emails (you now, waffley) from the financial food chain, a call early this week from Carlos confirmed that a storm was coming. As Carlos put it, "the past two weeks have been a bloodbath." Seems the subprime fallout is coming down Skylab style. Since we put 10% down on the house, and no one will give a jumbo loan worth more than 80% of the cash value of the home, we needed to sign up for a 10% second. In our case, a HELOC. Well, for banks, no-doc second loans have taken on all the appeal of buying waterfront property in New Orleans or listening to Paris Hilton recite Tennyson. Banks are apparently running scared and no one is buying loans out there. For anything. From anyone. Good credit, bad credit. Warren Buffet would probably need to provide five years of pay stubs and a semen sample to get a home loan now.
Speaking to Carlos Tuesday afternoon, he told me that he had been on the verge of vomiting all morning. Seems he had a list of twelve buyers for whom he was going to have to raise their second rates. Our name was on the top of the list since our closing date was only nine days out. After he told me about the bloodbath, he shared this internal email with me:
Carlos went on to tell us that most of the people on his list would be elevated from 7 or 8% second rates to 12-13%. He fully believed that, for some of the families, it would prevent them from making their payments. Some of those families had already sold their homes. He claimed that he prayed to the mortgage powers that be that morning and got them to approve our second, with Lennar even eating 1.5 points just to close the deal. We're in at just under 9%, which we'll attempt to re-fi in a few months.
Carlos concluded our call saying that he'd probably always remember our name because he thinks we'll get the last no-doc second for a long time to come. He went on to give an awkward kind of confession that he had partaken in questionable lending activities to "be competitive" in the market...overstating incomes and blurring the lines of financial reality for some applicants.
Well, that scavenger behavior has come home to roost, and the bones of this crazy lending environment are going to be picked clean. After the S&L bailout, and the dot-bomb, and the MCI and Tyco scandals, it appears that the mortgage industry is the next den of avarice and deceit to be exposed to the light.
Lori and I always carry some "coulda, shoulda" baggage about missing out on the buying frenzy that followed 9/11 -- when interest rates were in the fours and house prices were half what they are now. While we were forced to watch that window of opportunity slowly close, I get great satisfaction now realizing that we climbed in one side of this new window the second it opened and got our nails trimmed pulling our fingers in before it slammed shut.
Welcome to Kismet Manor.
If we were self-important or delusional enough to feel inclined to name our home in the tradition of colonial estates, I think this house would be called Kismet Manor. I've written previously (and spoken even more frequently) of the amazing good fortune we had in visiting the neighborhood the day we did -- back on April 1. I recall the specific segment of road on which we were driving and the color of the sky when I suggested we "take a drive by Cantara and see what we liked so much about that house." If I had never put that offer out there, or Lori protested, or the kids got cranky, or it was 30 minutes closer to dinner, or I had weekend work to do or it was raining...anything...we wouldn't have discovered the final phase of the development opened three weeks ahead of schedule and gotten the jump on the universe in selecting our lot. Lori and I still marvel at that galactic gift.
But now, on the closing side of the affair, another case of good luck has come our way. Our mortgage broker has been tinkering numbers for us for two or three months. We were always inclined to use Lennar's mortgage division, having succumbed to the seduction of the flooring incentive dangled so carrot-like in front of us. The numbers calculated back in May were pretty encouraging. If we bought two points down on our primary loan (we're doing an 80-10-10, 30-year fixed), we could get a 5.875% rate. But, unable to lock in anything until 30 days out from closing, we soon determined that those original good faith estimates had bad mojo working.
The heat of the summer set the suspicion stewing in the subprime lending market to boil. When our thirty-day milestone arrived, our mortgage guy, Carlos, informed us that rates were going up. Dramatically. With some coaching from him and bookmarks of key market indicators, we spent two to three days waiting to pull the lock-in trigger. Waiting for the CPI report to come out one Tuesday or Wednesday, Lori and I watched the tickers on CNNMoney.com fluctuate and oscillate. Like homeless people ogling slot machine wheels. "Come on 10-Year Bond, Daddy wants a low yield, now. Come'on big four-point-nine-seven! Stop, you sunnuvabitch!"
Once we hurriedly submitted paperwork to lock in our rate (deciding on paying one point and getting a 6.75% fixed rate), we thought all was good. But in the few weeks that followed, as we waited for the title company to come a'callin, there was trouble in the air. Lori's soothsayer superstition that forbade her to believe the house was ours until we signed on the bottom line was becoming seemingly more valid.
After a few Eggo emails (you now, waffley) from the financial food chain, a call early this week from Carlos confirmed that a storm was coming. As Carlos put it, "the past two weeks have been a bloodbath." Seems the subprime fallout is coming down Skylab style. Since we put 10% down on the house, and no one will give a jumbo loan worth more than 80% of the cash value of the home, we needed to sign up for a 10% second. In our case, a HELOC. Well, for banks, no-doc second loans have taken on all the appeal of buying waterfront property in New Orleans or listening to Paris Hilton recite Tennyson. Banks are apparently running scared and no one is buying loans out there. For anything. From anyone. Good credit, bad credit. Warren Buffet would probably need to provide five years of pay stubs and a semen sample to get a home loan now.
Speaking to Carlos Tuesday afternoon, he told me that he had been on the verge of vomiting all morning. Seems he had a list of twelve buyers for whom he was going to have to raise their second rates. Our name was on the top of the list since our closing date was only nine days out. After he told me about the bloodbath, he shared this internal email with me:
Tom Lefebure/Mia/FL/Lfs
08/06/2007 09:58 AM
To
UAMC BranchMgrs, UAMC SalesMgrs, UAMC ClosingMgrs, UAMC Center Managers, UAMC OperationsMgrs
cc
UAMC SecondaryMarketingAll, UAMC Regionals, Joe Martinez/Mia/FL/Lfs@Lfs, Arlene Polifroni/Mia/FL/Lfs@Lfs, Jimmy Timmons/Mia/FL/Lfs@Lfs, UAMC UnderwritingAll, Gail Piche/Mia/FL/Lfs@Lfs, Becky Moore/Mia/FL/Lfs@Lfs
Subject
Loan Program Update: all UAMC second liens
UAMC has made changes to our lending polices for second liens.
These policies are across the board, for all investors and all loan programs.
-- UAMC will only provide second lien financing with full documentation, effective with new locks immediately. UAMC no longer provides second lien financing for any documentation type less than full documentation. Second liens without full documentation that are already locked-in may close; no extensions allowed.
-- Maximum full documentation second lien financing is limited to 95% CLTV. UAMC will attempt to honor full doc second lien applications with CLTVs greater than 95% if the application has already been taken, based on investor guidelines. No new applications for full doc second liens with CLTVs over 95% (i.e. "100%" second liens) will be accepted.
Division Managers and Production Managers: please explain these changes to your associates.
Thanks,
Tom Lefebure
Products Manager
Universal American Mortgage Company
700 NW 107 Avenue Miami, FL 33172
Carlos went on to tell us that most of the people on his list would be elevated from 7 or 8% second rates to 12-13%. He fully believed that, for some of the families, it would prevent them from making their payments. Some of those families had already sold their homes. He claimed that he prayed to the mortgage powers that be that morning and got them to approve our second, with Lennar even eating 1.5 points just to close the deal. We're in at just under 9%, which we'll attempt to re-fi in a few months.
Carlos concluded our call saying that he'd probably always remember our name because he thinks we'll get the last no-doc second for a long time to come. He went on to give an awkward kind of confession that he had partaken in questionable lending activities to "be competitive" in the market...overstating incomes and blurring the lines of financial reality for some applicants.
Well, that scavenger behavior has come home to roost, and the bones of this crazy lending environment are going to be picked clean. After the S&L bailout, and the dot-bomb, and the MCI and Tyco scandals, it appears that the mortgage industry is the next den of avarice and deceit to be exposed to the light.
Lori and I always carry some "coulda, shoulda" baggage about missing out on the buying frenzy that followed 9/11 -- when interest rates were in the fours and house prices were half what they are now. While we were forced to watch that window of opportunity slowly close, I get great satisfaction now realizing that we climbed in one side of this new window the second it opened and got our nails trimmed pulling our fingers in before it slammed shut.
Welcome to Kismet Manor.
Labels: New house
posted by JabberDrew at 10:21 PM
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