The Re-fi of the Damned (aka Happy Happy Lenderman’s Revenge)

In 2010, Peter and I had managed to get our finances back on track after the great crash of 2008, and mortgage rates were at a (then) historic lows. We figured we could save quite a bit by refinancing, but as we soon discovered, it would be a painful, long-drawn out process that would take months, and more than a few false turns.

I found a list of possible brokers via Lending Tree, and contacted each of them. They were all eager to write up a deal, except that both Peter and I are self-employed, and as such, couldn’t provide a pay stub to prove our employment. We needed to show two years of federal tax returns, and even then, our 2008 tax return wasn’t sufficient. One broker tried to work with me to try to get a refinance rolling before we could put our 2010 tax return together, but it was a stretch.

Then before I knew it, Peter had contacted Amerisave, a brokerage which advertises wildly all over the place, and which had given him a song and dance that they could do what all the other brokers couldn’t do. (They were not one of Lending Tree’s suggestions, by the way.) But as it turns out, they were a massive waste of time, and stressful nightmare as well.

The days of Happy Happy Lenderman, the madness that had every single financial institution handing over gobs of money to anyone who wanted a house and was able to sign a document, were clearly long gone. Every day, the Amerisave agent instructed me to send him more and more financial documents. We send in our 2009 income tax return, with both of our Schedule C (sole proprietor business profit report). We also had to send in our current business licenses, asset depreciation forms, and both of our Schedule A’s (business expense details.) But, wait, there was more! Peter sells software, so they needed to see his 809 sales tax form, too. Even that wasn’t enough. They needed the last 3 months of our bank statements, both business and personal, and asked for Peter’s 401K fund statement. Finally, we completed our 2010 income tax form as soon as we could (much thanks to our new bookkeeper), and waited for the loan to come through. We’d been promised underwriting would take just a few days, given that we’d already submitted all the other data already.

And then our Amerisave agent disappeared. Yup, he just up and went missing. I’m already protective about my financial data and had been suspicious Amerisave needed bank statements, so it really freaked me out. I asked Peter how legitimate Amerisave really is. I tracked down the agent’s boss, who was equally flaky, and after two calls, pooped out on us too. AUGH!

I was hating life. I do not like sending my bank statements to strangers, no way, no how. And for this, we got nothing.

Whereupon Lending Tree called me (as had the other brokers, who were still eager to do business with us.) I was crazed by this point, but Peter talked to the agent, Pat, who guaranteed us she would get us a loan at the rate we wanted. The catch was, Lending Tree wanted $4000 for the process, but we’d never have to pay it again if we did another refinance through them. Personally, I had to get out Excel and do some calculations to figure out if this was worth doing again. It was. But given that just a few years ago, banks couldn’t give their money away fast enough, I was more than a little miffed that we, with more than adequate income and as residents in our home for more than 15 years, were suddenly being treated with more caution than the itinerant gardener who bought 5 houses, and surprise, surprise, couldn’t pay for any of them.

Well, I’d scanned the copious amount of documents we’d sent to Amerisave, so getting it over to Lending Tree was easy enough, if still tedious. But all that still wasn’t enough. On top of it, we had to write a sworn and witnessed document that the closing funds wouldn’t make Peter’s business insolvent. We had to sign forms letting the lender check that the numbers we showed on the tax returns we sent in matched those on the forms the IRS received (as if we’d fake a tax return!!) We had to write a signed and witnessed letter saying we weren’t taking out any new loans, because we had a bunch of credit inquires (from the brokers who were trying to get us a loan, including Lending Tree itself). I had to come up with profit and loss statements for both my business and Peter’s. Oh, and we needed a letter from a CPA confirming our businesses were solvent and would not be affected by the refinance, even though the same business(es) had been perfectly able to pay the current loan for the last 15 years.

I forget what the last straw was, but it was just too much. The agent wanted us to take out $10,000 more than we needed so that the closing costs wouldn’t be taken from the business Peter owns. In short, from being giddy with their funds, the banks are now like Gollum in Lord of the Rings, clinging to their credit lines like they’re the One Ring. It was like they had all been communally on some euphoric drug, and suffered a sudden withdrawal or side effect which left them utterly and completely paranoid. A bank makes money by lending it out, but they couldn’t do it any more because they’d already given it away to people whom anyone rational knew (even without the underwriting that was clearly never done) would never be able to pay it back. And, now, here we were, solvent, sober, and successfully self-employed, getting an underwriting work-over that was just too much.

Agent Pat told us only three banks are still writing any home loans at all: Bank of America, Chase, and Wells Fargo. Everyone else, it seems, may be on the verge of collapse, desperately hoping to turn around their foreclosures and praying there will be no more.

In the end, we got our refinance, at a lower rate, screaming and kicking all the way through, and paying an extra $4000 just to get a broker who wouldn’t do a quick fade a month in. But the bank that has the new loan still can’t get its paranoia under control. They’ve twice sent me letters demanding proof of home insurance, threatening to make me pay for their own overpriced home insurance, and ignored all the information and documentation I’ve sent, proving, that, yes, indeed, we have home insurance, and, yes, indeed, they are listed as the mortgagee. The insurance broker has now promised me they’ve been faxed the information directly to the bank, but we’ll see.

One good thing that came from the mortgage euphoria crash is that friends who used to be priced out of home-ownership can now afford real estate. But if you need a loan, it’s clearly a hassle to get one, especially if you’re self-employed. It’s no wonder more houses than ever are being sold for cash to investors who have enough at hand; and though I love my “slumlord” friends who have rescued decrepit property and fixed it up for rent, I’d rather more people could buy their own homes at prices they can pay. In short, the insanely paranoid underwriters may be almost as bad as the insanely euphoric ones of the recent past.

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