In 2006 we went looking for new opportunities and left Colorado Springs for Seattle. My friends, coworkers, and I packed everything my family owned into a rented van and hustled across country with an old dog and three cats in tow. The job opportunity I had waiting for me was easily the most lucrative of my career so things looked good, despite it being the wettest winter on record (which is saying something for Seattle). The next year we bought a house in a nice neighborhood in town at the peak of the housing bubble -- despite a few doubts -- and today we're ready to hand this place back to the lender.
We weren't overly-naïve or greedy homeowners, if it matters. This is the third home we've owned since 1998. The first doubled in value by the time we left DC for Colorado Springs and the second turned a surprising (if modest) profit, even after only two years of ownership. Both of those were purchased with 10-20% down payments and old-fashioned, fixed-rate loans. When we purchased in Seattle, the mortgage/escrow payment remained roughly a third of our (higher) income, even with a 100% loan and high-triple-digit increase in monthly outlay over our previous rent (did I mention we purchased the house from our landlord at the time?).
See, we're a single income household (mine) with two children, one with special educational needs. With these in mind we've at least tried to take the cost-of-living formula seriously: A fixed housing expense much above a third of our income (at least in this town) and we'd simply die working and broke.
That said, everything ran off the rails with remarkable ease.
- In mid-2008, the company I worked for went out of business. I didn't realize it at the time, but that year's taxable income would be a third less than the year before, bumping our mortgage payments past 40% of our income.
- After going on unemployment and motoring through our savings (for longer than I'd care to admit) I found good contract work, but without medical benefits.
- Gambling on a contact-to-hire possibility, we stuck with this for a year, running headlong into thousands of dollars in out-of-pocket prescriptions, a pair of E.R. visits for the kids, and other unremarkable costs of living.
- By mid-2009 we were surviving with installment plans from every medical provider and eating a lot of beans and ramen, yet hadn't missed a single mortgage payment. We'd never missed one before when times were even leaner, so why give in then?
- Starting in July, however, we timidly asked our lender for help. Seeing as we hadn't missed any payments, however, we were at most allowed to submit a hardship affidavit, tax returns and statements, and pretty much get ignored for the next two months, despite regular pestering by phone.
- By September, however, both of our vehicles -- a '98 Saturn and '95 Ford van -- developed expensive problems which ended ambitions of keeping current with the mortgage. We canceled our twice-monthly, automatic "Equity Accelerator" debit and waited for the bank to call us.
- Come early October, the bank had a crisp information packet on the Federal Home Affordable Modification Program (HAMP) to send us, complete with a much improved version of the affidavit and other materials we'd filled out earlier in the summer.
- We filled all this out hopefully and FedEx-ed it back within a few days, then followed up by phone several times a week over the next month. More thoughtfully than with our unofficial attempt earlier, the lender apologized for mail room/processing delays and this/that but still left us in the dark.
- At the end of November, just as we were losing hope, we were sent a concise HAMP "trial period plan," scheduling three monthly payments roughly 8% less than before (a difference in the low triple digits, to be specific), to be followed by a genuinely modified loan.
- This didn't improve the bottom line and we lost hope again. After consulting with the lender, however, we returned the agreement unsigned with (as directed by them) a letter explaining why we couldn't make it with this plan and asking for a better deal. They suggested we try and it couldn't hurt, right?
- About this time, however, I secured a full-time position with benefits, though with slightly less actual income. Things were looking up, at least in a personal sense. If we got sick, we'd get cured, and we could finally get current with our doctors, the hospital, etc.
- We heard nothing further through the end of the year, however, and by mid-January we'd been notified a foreclosure sale was set for the end of May (yeah, this month). By the end of January, we were actively looking for an apartment and considering a deed-in-lieu-of-trust (in English, that's "giving the house back to the bank", which is less convenient than it sounds).
- The very Friday we were about to write a check for a rental deposit, however, we received a new deal from the lender. Word for word the same sort of trial period plan, except now they wanted a little bit less than a third of our (newly reduced) income. Hot dog, we thought: We're back in business.
- We made all three payments on time -- from March through May -- checking two, sometimes three times a week by phone for updates on (a) a final loan agreement and (b) cancellation of the foreclosure sale, seeing as we were pouring much of our income back into the house and couldn't leave on a moment's notice.
Along comes the week before the foreclosure sale (that'd be last week) and we get the final loan agreement, and what...a...surprise. We were denied for HAMP due to reason #11 on a long-ish list of possible ones -- "insufficient documentation before the deadline," more or less. This seemed nuts, considering how obsessively we'd worked the phones to prevent such an outcome, the lender assuring us repeatedly that our paperwork was in order and a final modification in the bag.
The good news in the same FedEx (from their standpoint) was our investor (Fannie Mae) had a a whiz-bang alternative program we were a shoo-in for, (a) minus borrower incentives (cash, which we didn't need), but (b) with very different details. Specifically, a return to the original mortgage terms after a five-year ramp-up from the trial period payment and (apparently) late fees and penalties from the last few months tacked onto the end of the loan, extending it another three years after restarting the clock (yes, 33 years from now).
Ugh, we thought: Any chance after five years -- when our children are in their teens and we're even closer to being unable to earn income -- we'll actually need less money? Kinda doubt it. And with this house now valued at roughly 60% our purchase price, we estimate it would take ten years to return to where we could consider selling it. This would be taking food from our children's mouths for the rest of their young lives, pure and simple. I do not expect a lender to casually surrender an asset's value, but I also don't expect them to play every angle to keep marginally-informed borrowers in over their heads.
I needed to know what we'd missed, regardless, or might otherwise bite us in the ass if we talked ourselves into this new solution after all. Fortunately, having called our lender's loss mitigation department so much I'd dealt with the same, specific people several times, to the point they acknowledged this whenever I bumped into them. On my next call with one of these regulars I picked at the reason for denial and learned that "everyone is getting that" -- reason #11 -- and "they're all printed that way," and further that our file did not appear incomplete. There was also no apparent reason we could be denied for either program, certainly nothing in the lender's own records.
Huh...Well, since we're such good friends after all this time: Screw them.
Hazarding a guess, I'd say the HAMP program tastes bad to the lender, probably due to restrictions on modified loan terms, upcoming imposed principal reductions, or some such. Much better to lever desperate/credit-obsessed borrowers back into their original terms, it seems, complete with heaped-up penalties on the back of the loan, shaking everyone else loose to trim losses. I think this noise is shady, but I don't care any more, and I should think the lender doesn't either. These kinds of deals are for people fixated on keeping a house, who'll kill themselves to meet the terms they signed for, even when their investment will no longer do them any good.
This is also a speculation game we're sure to lose, so now is the time to cash out.
What else have I learned? Well, I came of age just as mortgages became the only loans with deductible interest and home values soared (in the 80's), when the common wisdom was that buying a home was integral to a civilized future. That's an extinct notion, I can see that now. I'm not terribly bitter, however, even though I'm leaving a nice neighborhood where we've made good friends. I've lived in (a) some nice homes, including (b) this one, (c) rent free for much of the last year, even if the lender still has their hooks in me for a huge amount of money. Home buying and selling for the amateur (meaning me), however, is for the birds.
We probably will get to live on and live well, thankfully, and provide a good future for our children. That's what matters, no matter where we hang our hats.
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Addendum: So, over the last year or so we've been scraping together what we could to build out a rental unit in our finished basement, perhaps ~700ft2 (nothing extravagant). Renting this out would've made the trial period payment doable over the long term.
Anyway, after getting permitting/plans like the city wanted, craigslisting a fridge, building a sink/flooring from Ikea, and a new dish washer/garbage disposal we're considering calling the plumber who connected everything last month to see what he'd give us for the stuff :(
(Wondering if it'd be too over the top to take back the new 30yr roof we put on the place two years ago...)