CHESSNOID

I think this was a great article in the NY Times by Edmund Andrews.  It highlights his personal experience in the housing market and how he and his new wife jumped in before the housing bust.  I thought it was brave of him to write about his experience, as well as extremely insightful because he disclosed personal details about himself, the loans, and his personal finances.

Here is the link to Edmund Andrews’ story: My Personal Credit Crisis.  It is a great read although somewhat long.

The only problem was money. Having separated from my wife of 21 years, who had physical custody of our sons, I was handing over $4,000 a month in alimony and child-support payments. That left me with take-home pay of $2,777, barely enough to make ends meet in a one-bedroom rental apartment. Patty had yet to even look for a job. At any other time in history, the idea of someone like me borrowing more than $400,000 would have seemed insane.

But this was unlike any other time in history. My real estate agent gave me the number of Bob Andrews, a loan officer at American Home Mortgage Corporation. Bob wasn’t related to me, and I had never heard of his company. “Bob can be very helpful,” my agent explained. “He specializes in unusual situations.”

Bob returned my call right away. “How big a mortgage do you think you’ll need?” he asked.

“My situation is a little complicated,” I warned. I told him about my child support and alimony payments and said I was banking on Patty to earn enough money to keep us afloat. Bob cut me off. “I specialize in challenges,” he said confidently.

As I quickly found out, American Home Mortgage had become one of the fastest-growing mortgage lenders in the country. One of its specialties was serving people just like me: borrowers with good credit scores who wanted to stretch their finances far beyond what our incomes could justify. In industry jargon, we were “Alt-A” customers, and we usually paid slightly higher rates for the privilege of concealing our financial weaknesses.

I thought I knew a lot about go-go mortgages. I had already written several articles about the explosive growth of liar’s loans, no-money-down loans, interest-only loans and other even more exotic mortgages. I had interviewed people with very modest incomes who had taken out big loans. Yet for all that, I was stunned at how much money people were willing to throw at me.

Bob called back the next morning. “Your credit scores are almost perfect,” he said happily. “Based on your income, you can qualify for a mortgage of about $500,000.”

His situation isn’t resolved in the end. Eventually, he stopped paying his mortgage and his mortgage company still has not begun foreclosure proceedings against him after 8 months of missed mortgage payments. Before he defaulted on his mortgage loan, Andrews calls and speaks to a customer service representative who tells him that they can not offer him any payment reduction help because he was not 90 days past due. This is the reality of loans and companies who service loans. You think you are being responsible by telling them your current situation like “I was laid off, my wife lost her job, my hours have been cut, etc” and then the mortgage company says call us back when you are delinquent, then we can chat.

When I first called Chase in October, a representative named Sarah said I didn’t qualify for a loan modification because I wasn’t yet 90 days past due. The only “loan modification” she could offer me was a “repayment plan” under which I paid $400 more per month for six months until I was current again.

“It sounds as if I would be better off waiting to fall 90 days behind,” I said. “I think I’ll wait for that.”