7 Nov
2011
Posted in: Alternative Lending
By    Comments Off on Peer-to-Peer Lending

Peer-to-Peer Lending

In a few recent conversations, I eluded to the idea that we, as individuals, have money that we want to invest. Individuals also need loans. For a moment, I imagined a world where people were able to lend money to people, eliminating high interest rate bank loans altogether.If I could secure a loan from an individual for $45,000 at 4% to pay off my second mortgage to the bank, this would lower my payments so that I could continue to afford living in my home. The individual lender would make 4% interest, keeping in mind that you can put your money in a CD and it only returns 2%.

It sounded ridiculous, that anyone would loan you $45,000, but I couldn’t get it out of my mind. Well, it turns out, it’s already happening. I came across this article on peer-to-peer lending and crowdfunding.

Then I thought about one of my clients, who is having a fundraiser in hopes of raising $15,000 to help support the move of their business, and again, I thought, this is not that radical of an idea. Organizations are already implementing these types of lending and fundraising. So, if I’m unable to access government assistance, maybe individual assistance is an option.

The Interest Rate Game

Peer-to-peer lending organizations like Prosper connect individuals who want to invest money and individuals who want to borrow money. It operates on the same principal as traditional lending businesses in that they base interest rates on your credit score. Instead of borrowing from corporations, however, you borrow from people. Rates start at 6.59% and you can borrow up to $25,000.

If I am not able to access the 4.5% interest rates at the banks with my second mortgage ($45,000), or refinance under the HARP program (to be determined — I’m not giving up yet), the back up plan will be to make $10,000 in 3 months, ask a family member for a $10,000 loan at 3 or 4% interest and get the peer-to-peer loan for $25,000 and hope for a lower interest rate than the 8.49% rate I currently have. Even if the rate is the same, I would prefer that the majority of that interest go to a person, instead of the banks who are doing everything in their power not to assist the people who were most affected by their greed that broke the system in the first place.

6 Nov
2011
Posted in: Application Assistance, My Ongoing Story
By    Comments Off on Neighborhood Housing Organizations

Neighborhood Housing Organizations

Since I started documenting the process of applying for the HARP program, I’ve been talking to a lot of people about my journey through understanding it. So many blockades arise as a result of negligence, inattentiveness, intentional and unintentional confusion, and mindlessness.

Yesterday, a friend told me that he was able to receive a lower interest rate with the HARP program by collaborating with Neighborhood Housing Services in Minneapolis, MN.

Neighborhood Housing Services (Minneapolis, MN)
www.minneapolisnhs.org
612-521-3581

This organization sorted through all the preliminary details for my friend, at no cost, and all he had to do was jump in at the end to verify that he wanted to move ahead with the HARP program. Because this organization was able to advocate for my friend, and knew what the rules were, they were successful. It’s not so easy for the average homeowner, and that’s because the banks and mortgage companies don’t want to make it easy.

Neighborhood Housing Organizations — Are They Key to Accessing the HARP Program?

I started wondering how many other neighborhood or housing organizations are out there in the United States, helping homeowners make sense of, and access, programs that are intended for them. And how many of these people are not able to weed through the red tape themselves.

Because I live in St. Paul, the organization my friend worked with was not able to assist me, but on Monday I will call the neighborhood association they recommended for my area to see if they are able to help.

Community Neighborhood Housing Services (St. Paul, MN)
www.communitynhs.org
651-292-8710

Check back to find out what I learn.

5 Nov
2011
Posted in: My Ongoing Story
By    Comments Off on FHFA Announces New Program

FHFA Announces New Program

A ray of light came on Monday, October 24th, 2011 in the form of a Washington Post article.

FHFA announces new program to help ‘underwater’ homeowners

This was the beginning of my new part-time job: applying for the HARP.

The process includes research, gathering bank statements and tax information, calling banks, lenders and community housing organizations, and, above all else, sorting out a lot of misinformation, often in the lending companies themselves. The goal is to benefit from a program that was deigned for someone my exact situation, document my experience, and provide a bit of guidance to others who want to apply for HARP phase II.

HARP Phase II is designed to make it easier for those who are underwater to access the money that was designated to help them. This article in Housing Think, FHFA Clears Hurdles for More Homeowners to Refinance Under HARP, sums it up nicely.
“In HARP’s case, the target homeowner is one who wished to refinance his or her mortgage, but owes more on their mortgages than their individual homes are worth. Program administrators believed that underwater homeowners represented a substantial portion of the troubled homeowner populations, and that HARP would go a long way to stymie the accelerating wave of foreclosures flooding the nation’s housing market.”
4 Nov
2011
Posted in: HARP in the Media, My Ongoing Story
By    Comments Off on CJR: Bank of America’s Disasterous Countrywide Deal

CJR: Bank of America’s Disasterous Countrywide Deal

First Equity Mortage, and my loan, was sold to Countrywide in 2008

In early 2008, my primary loan at Countrywide was bought by Bank of America.

Read CJR’s article about “Bank of America’s Disastrous Countrywide Deal.” The “dumb” money squandered tens of billions of dollars on Angelo Mozilo’s predatory lender.

3 Nov
2011
Posted in: HARP in the Media
By    Comments Off on WSJ: Twelve Questions on Obama’s Refi Plan

WSJ: Twelve Questions on Obama’s Refi Plan

On October 23rd, 2011, The Wall Street Journal reported about specifics of the HARP 2 revised plan in Twelve Questions on Obama’s Refi Plan. This article clearly defines the differences between HARP and it’s revised 2.0 plan to help more homeowners than the previous program allowed.

2 Nov
2011
Posted in: HARP in the Media, My Ongoing Story
By    Comments Off on Take My Money, Please

Take My Money, Please

I’m Still Making Payments Every Month, So Why Doesn’t Anyone Want My Money Anymore?

Couldn’t one of my mortgage holders take over the other mortgage holder’s loans and offer me the lower percentage rate?

I get it, I don’t have any equity because my house is worth less than when I bought it. But I never had equity in the first place, and now that the banks are supposed to be helping us get back on top of things, it’s harder than ever to get anyone to do anything.

CNN Money reported that over 100 banks received over 200 billion dollars, allegedly to promote new lending. I’m still stuck with outrageous mortgage payments while  Jamie Dimon, JPMorgan’s CEO who ushered US Bank through the financial crisis, just got a $19 million dollar raise.

More recently, in November of 2011, Bloomberg News reported the following:

The central bank provided emergency loans, asset purchases and other aid totaling roughly $7.8 trillion during a two-year period ending in March 2009, easily the largest component of the government efforts to bulwark the financial system.

I have loans at percentages that are no longer appropriate for the market, with two different banks* that received upper-end amounts of bail out money. How is it any more of a risk to them to refinance me? I’m already a risk. I already have the loan, so lower the interest rate so that I am less of a risk because I am more likely to continue to sustain my payments over time. Isn’t that what the bail out money was for?

And Jamie Dimon isn’t the only one giving himself a nice fat raise, banks are making less, while bonuses are being handed out by the millions. *Bail Out Money Received by the Two Banks Holding My Mortgages Bank of America: $15,000,000,000 U.S. Bancorp (US Bank): $6,599,000,000

1 Nov
2011
Posted in: My Ongoing Story
By    Comments Off on A Loan Deferred

A Loan Deferred

Losing the ARM

In 2006, the ARM interest rate was going up, up, up, and after several months of waiting it out in hopes of an interest decrease, (and calling my own and other mortgage companies every couple of weeks about possible solutions), I started to consider taking a high fixed rate mortgage. There wasn’t much else to do, it was either get it fixed at a high rate, or watch it continue to go up past 10% in the ARM.

US Bank

US Bank was ready and willing to solve my problems. While the lowest interest rate they could offer me was 8.49%, they boasted that as long as I continued to keep my 2nd mortgage with US Bank, that I could refinance at any time with no closing costs. I asked what the catch was, and they said “No catch. Refinance with US Bank at any time with no closing costs.”

Me: “So when the interest rate drops to 6%, I can walk in to US Bank, and refinance at that rate, no closing costs?”

US Bank: “Yes”

If I prepay the whole loan, or move to another lender, I have to pay a penalty of 1% of the original loan amount with a minimum of $250 and a maximum of $500. But why would I ever want to move my loan to another lender if I could refinance any time with no closing costs? So I refinanced at 8.49%, a 15-year loan for $564/month. The intention was to refinance as soon as rates dropped; they couldn’t stay that high forever.

New total monthly mortgage: $1800
Initial monthly mortgage: $1150

I’ve been paying this $1800 monthly mortgage for 5 years now, and have never missed a payment.

When interest rates finally came down a couple of years ago, I visited US Bank for a refi, confident that I was finally going to get my mortgage back under control. However, now refinance was not an option because I had no equity, due to the crash. My house was worth much less than what I bought it for. Possibly even $40,000 less, give or take $20,000 dependent on the Zillow estimate or various bankers I spoke with.

I realize that this makes perfect sense to a financial institution. Who is going to refinance a loan that does not have sufficient collateral?

I’d like to offer another perspective on this issue.

Do As I Say, Not As I Do

I bought my house for $0 down. I had no collateral and no co-signer, and the banks were more than happy to lend me money when the bubble was getting bigger and thinner. I was a loan risk, but I didn’t know it back then. They encouraged me to dive in and I did. It was my first house and I’d never taken out a loan before. 6 years later, I am making 1/3rd more income than when I bought the house and worked at an ad agency. I’ve had to make this happen through hard work and long hours, mainly just to pay my minimum mortgage requirement after the refi.

  • My house is worth less.
  • I make 1/3rd more income.
  • I’ve never missed a payment.
  • I never had collateral for the initial loans.
  • I never put any money down for the initial loans.

It’s no more of a risk now then it was when they gave me the loan in the first place.

The burden falls to the people who have these high interest rate loans, even though most of us never had collateral in the first place, but were given loans by the banks nonetheless. I’m happy that I was able to purchase the house, and that I was able to make a life to sustain it as best I can as a result of crash of the housing market (in retrospect, only because I was laid off and worked as hard as I could as a freelancer to make ends meet). My concern is that they gave me a loan with no collateral and $0 down, and now I have no collateral and no equity, just like I did back then, the banks screwed up the housing market, and I still can’t refinance so that I can live sustainably.

If I didn’t have equity then, why is it that I am not allowed to refinance because I still don’t have equity, and they are already the owner of the loan and my home? If I don’t have equity, how is it more of a risk for them to refi? I am already a risk, and a higher one if I can’t sustain the $1800 payments indefinitely. It’s not a risk to them at all to refinance the underwater home that they already own. It’s just not as profitable.

I guess that is what the HARP is for, but I’m still not able to access that program to date.

How Much More Can I Give To Thee, O Bank of America and US Bank?

I’ve invested $121,200 total in payments over the last 6 years for a house that I bought for $200,000 and may or may not be worth at least $50,000 less, give or take $20,000.

It’s possible that I could do this for another 5 years (totaling $242,400 in payments), and still have no equity, or just be starting to build equity. That is the thought that woke me up. As busy as I am trying to work hard enough to bring in the amount I have to bring in to make ends meet, I have to start working harder to understand why my mortgage company and my bank won’t help me out of a situation that they are responsible for in the first place. And if I am going to put all of this work into figuring out this program that is supposed to benefit people just like me, I may as well share the journey so that others can be helped along the way too.

31 Oct
2011
Posted in: My Ongoing Story
By    Comments Off on Welcome to Your New Home

Welcome to Your New Home

A Dream, Not Deferred

In April, 2005, I bought a house. I was a 36-year old, single woman working at a prominent advertising agency in Minneapolis, MN. 1 week after closing on the house, I was laid off, and I did what any former freelance designer would do: I started making phone calls, redeveloping contacts and fought my way back into the freelance market.

The Mortgages

My $600 rent was about to more than double to become a mortgage to accommodate a $206,000 loan (the maximum amount I was able to borrow) for my cute little fixer-upper, single-family 1914 bungalow in St. Paul, MN.

I had two loans totaling $206,000.
Total payment per month: $1386

(Numbers rounded to the nearest dollar.)

1. American Mortgage Network, Inc.
AKA First Equity Mortgage (AKA Fannie Mae)
$164,800.
30-year fixed
6%
$1155 | Monthly Payment

$988 | Principal and Interest
$120 | Property Taxes
$046 | Hazard/Flood Insurance
$000 | MIP/PMI

2. CitiBank | Home Equity Line of Credit
$41,200
15-year ARM (Adjustable Rate Mortgage)
6.75% | April, 2005
$231 | Monthly Payment
9.25% | December, 2006
$324 | Monthly Payment

The Plan

The mortgage broker’s strategy was simple: start out with these 2 loans to get into the house, and refinance when interest rates drop to get out of the ARM. Seemed simple enough.

The plan was to get me into the house (or any house) quickly. “Buy now, tweak later” was the attitude.