Feeling the crunch

if you’ve been following Wall street lately, or even if you haven’t, chances are you’ve caught wind of the crashing sub-prime market and “credit crunch”.

Quick synopsis – over the past two years, lenders (real estate) have been very loosey-goosey with their money and created all kinds of creative ways for borrowers with less than perfect credit and not a whole lot of income to buy a home and live the American dream. Most of this creative financing came in the way of 2 &3 year ARMs, stated income loans, and 100% financing deals. As the 2-year mark passed, the ARMs adjusted up and left the borrowers with mortgages they couldn’t pay. People began defaulting, foreclosure sales were (are) on the rise across America and subsequently, the sub-prime lending industry lost their ability to package and sell their loans on the market. Who wants to buy loans that are destined to default?

So, now, the smaller sub-prime lenders are being forced to hold onto these loans that are going into foreclosure left and right, and consequently – these banks are going bankrupt at a very fast pace. Guess what this means? If you don’t have a sizable down payment (15-20%), or great credit, you’re probably not going to be buying a home anytime soon. What’s shocking is that this tightening of credit is starting to ripple up to the big guys… ever hear of Countrywide? They’re one of the biggest home lenders today and their stock is tanking with talks of bankruptcy. Kind of scary…

Why am I going on about all of this? For two-reasons.

First, from a political standpoint, the Fed’s, big banks, and borrowers all blame the sub-prime lenders for getting them into this mess in the first place. I completely disagree. A lender doesn’t cause someone to lose their house. A borrower who isn’t financially savvy or lies (stated income loans) about their income so that they qualify for a loan is responsible for losing their house. It’s the same argument against tobacco companies… it’s common sense that if you smoke, chances are you will die from it. You have to use your brain and quit blaming other people for crap. C’mon people.

Second, Chris and I have been caught up in this lending mess since May trying to close on our next house. It has been an absolute nightmare! As of today, we are 7 days past out original closing date and are still unsure if the loan will even fund. Luckily for us, (and bad for our seller) the seller is one of those people facing foreclosure which buys us a little more time - she can't exactly re-list. She’s about to lose her house and it’s a rat race trying to get our bank to beat her bank to the end. If we don’t get this thing to fund soon, her house will go to auction and we’re both screwed. This has been the most exhausting transaction we’ve ever dealt with. We’ve been fighting – literally – to get this through and everyday it doesn’t is another day closer to losing the whole deal. Now, when I say “fighting”, I’m not just saying “we’re working really hard”. We have both been on the phone YELLING and bitching people out over this. It hasn’t been pretty. We’re drained and almost want to walk away from the whole thing… but we won’t. We have too much time & money invested at this point.

There are a lot of other things factoring into this that have made it the nightmare that it is… I’ll spare details but basically, we let the seller take the $5,000 earnest money upfront so she could pay her mortgage while we waited to close. We found out a couple days ago that she didn’t use this money to pay her mortgage and that’s why she’s facing auction so soon. Thanks. Also, this is the first time we’ve pushed a loan of ours through another broker. All of our loans usually go through me as I’m a licensed mortgage broker. This dumb ass has no idea what he’s doing. He’s seriously an idiot and doesn’t know how to get shit done. His most famous line: “I’ve called them twice and haven’t heard back”. “Well, IDIOT, I called YOU five times and that’s what got me a call back.” See how that works you F*%%#! MORON! I do believe that if this falls through, it's in part to his complete incompetence.

Anyway – that’s the crap we’ve been dealing with… we have no idea if we’re going to get this house and it sucks. We are drained and cranky and just want the whole thing to be done with. Times like this really make me wonder why the hell we’ve chosen this path. It’s stressful and frustrating but if it works out in the end – we will be two very happy people! If not, we’ve started a list of projects to do around our current house to make us feel better.

ugh. TGIF?