Tuesday, August 10, 2010

So You Think You Want To Refi?

So mortgage rates are low and you think you want to refi, huh?

I've got excellent credit and I've got loads of equity in my home. A decent income doesn't hurt either. With all that going for me I assumed it would be a snap like it was a year ago when I refinanced. I was wrong.

I started by sending my mortgage broker two years worth of tax returns, copies of W-2's, three months of bank statements for both of our accounts, broker statements, social security card copies, driver's license copies, our homeowner's insurance policy, a copy of parts of our living trust and a recent mortgage payment statement.

Next came the appraisal which turned out just fine and meant that our loan would be for 56% of the value of our house. One would think that any lender would be thrilled that we had so much equity, and that may have been the case except that the underwriters then got involved.

For those of you who don't know what an underwriter is, he/she is the person working for either the lender or, in my case, the mortgage broker. Their job is to review all the paperwork, ensure that your loan will give the lender warm fuzzies, and then find ways to not approve the loan.

The first bizarre request was for me to remove a tree in my front yard. The tree is approximately 12 feet high and is shaped like a half-moon. Why it grows at an angle is beyond me but it was like that when we bought the house 10 years ago and, aside from growing a little, it hasn't done much of anything other than lean. And what is most puzzling is that it doesn't lean towards the house.

What were they worried about? Would it suddenly spin on its trunk and throw itself at the front window? Would it leap out of the ground, hurtle eight feet from where it's planted onto the house and wrestle the chimney off the roof? This is the tree that our neighborhood calls the "Doctor Seuss tree" because of its comical shape. Doctor Seuss, not Stephen King!

As a compromise the underwriter suggested anchoring it to the ground with wire and a tree stake. I suggested the underwriter anchor a brain to himself which must have hit home because he dropped the tree removal requirement.

The next issue was our pool. I know what you're thinking: "What could be at issue with the pool? Cracks? Proximity to the house? Loose diving board?"

Think simple and think like a moron. They questioned the water!

We have a motorized pool cover that was closed when the appraiser came out. Naturally the appraiser took pictures of everything including the pool. Because she actually had a brain she didn't ask us to open the cover but she was rational and the underwriter was not. They wanted more pictures with the pool cover open, requiring that the appraiser come over again and take more pictures.

I can't quite imagine what they were thinking. It's not as if a lack of water would reduce the value of our home "appreciably" (refinancing joke). But what did they think was under the cover? A tar pit? A meth lab? 40 marijuana plants? An illegal pre-school? A naked man floating on his back?

So somewhere in my lender's archives along with all of my loan information is a picture of a middle-aged naked man floating on his back in a pool, flipping the bird to the camera.

Everything was good and we had two weeks left in which to close the loan or lose the super rate we were getting. Finally all the roadblocks were out of the way and the mortgage broker assured us that it would be clear sailing from here on out.

Except for the other issue. A few years ago my father-in-law passed away and left my mother-in-law to deal with her own financial affairs. My father-in-law was a bright man and recognized that 1) it would be difficult for his sheltered wife to suddenly step into a role that he had handled for them for 50 years and 2) that it would be doubly difficult considering my mother-in-law has early stage Alzheimers. So he wrote into his living trust that my sister-in-law and I would become co-trustees if a doctor determined that his wife couldn't handle it. That was good for family affairs but bad for my refi.

"Why are you the co-trustee," the underwriter asked. "Are you obligated on her mortgage loan?"

I explained the situation and told him that a trustee who has not signed the note as an individual is not obligated. And I was only listed on the deed as an addressee: "Marc Bloom, co-trustee of the blah, blah, blah Family Trust."

So the underwriter wanted a statement explaining it. Then he wanted another statement elaborating on the first statement. Then he wanted a copy of the note proving that I hadn't signed it. Who has a copy of somebody else's loan? He might as well have asked me for a copy of Obama's blood test (sorry, different subject). Heck, it didn't show on my credit report and it didn't show on any of my mother-in-law's mortgage data. You would think that would be enough to prove it. But I never got any word on whether or not my explanations satisfied them because they were still looking for more reasons to turn me down. I should have told them how many of my clients have me listed as co-trustee. That would have made plenty of steam come out of the underwriter's head.

Next the underwriter wanted certain pages from my in-laws' trust to prove I was a successor trustee. Then they wanted a note from my mother-in-law's doctor as to her incapacity. Then they wanted proof that my father-in-law was dead. Rather than exhume the body I went with a copy of the death certificate just for convenience. But if he had been cremated I would have simply taken a picture of an ashtray.

Well, the "lock" (the rate from the lender is only guaranteed for a specific length of time) on my super rate expired before closing and my mortgage broker had to pay to extend it so he's not happy. So I sat and waited to see what the underwriter would say. I was told that the lender has been involved in some of the controversy but to what exent these frivolous questions came from them I couldn't say. So, for a while, nobody knew if I was going to be approved.

Finally the underwriter and the lender ran out of reasons to turn me down and on the evening of the next rate lock expiration the notary showed up to have us sign docs. There were mistakes everywhere (including our address on one of the documents) but I assured my wife that it was still okay to sign which elicited the look she gave me when I came home drunk from a bachelor party a few years ago. I guess quality control goes out the window when you're facing a deadline.

Three days later I received an e-mail from the mortgage broker asking me to sign a profit & loss statement that I submitted to them a month earlier. Without it the loan would be denied. Why didn't they know this when I gave it to them in the first place? What next? Will I be required to send them a picture of my dog before the first payment is due?

So, if you think that solid credit, good equity and a decent income is all that's required to refi then I want some of what you're smoking. Prepare yourself to be frustrated and for the process to occupy more of your time than ever before. You'll be answering questions that you consider inane and you may be answering them more than once.

STOP THE PRESSES! I was supposed to close on Tuesday, fund on Wednesday and have a small refund check hit the mail today but something else has cropped up. Can you guess what it is? The cashier's check bounced? No. We are already in default on the new loan? No. Okay, I'm going to flip all the cards and just tell you: I am on the FBI's Terrorist Watch List. Not me, Marc H. Bloom, but apparently somebody with the name "Marc Bloom."

When I got the call from my mortgage broker's office advising me that my secret identity had finally been uncovered I thought they were just messing with me. But it was no joke.

"You know that it's 'Bloom', not 'Boom,' right?" I asked her.

"Yes, we know," she responded timidly.

"Was it the driver's license picture of me wearing a keffiyeh?" (Arab headdress)


"I thought I put 'CPA' down as my occupation on the application. Did I accidentally misspell it and write 'terrorist?'"


Can you believe it? I can't. And my wife laughed her head off when I told her. It is rather comical when you step back and look at it but I would imagine that some people would fail to find the humor in it.

Obviously I am not a terrorist and the lender finally cleared me (after a few threats). I closed yesterday and everything seems to be fine although I haven't received my refund check yet, however there's no reason I shouldn't get it but the way this thing has gone I wouldn't be surprised if my name is misspelled or the decimal is in the wrong spot (two places to the right would be preferred).

Sadly, the new financial environment in this country makes it virtually impossible to smoothly conduct any kind of credit business. And when you throw in a skeptical, paranoid, bozo of an underwriter and a skeptical lender you can bet your butt that not only will you have to jump through hoops but you'll have to prove that the hoops aren't those magical rings that Criss Angel uses.

(Note to underwriter: I am calling off the fatwa.)

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