Whoops, Where'd My Mortgage Go?

NPR interviewed a would-be Brooklynite named Claudia who is trying to buy an apartment for herself and her teenaged sons. Everything seemed settled, when all of a sudden the lender that was going to be offering Claudio her HELOC loan decided they didn’t really want to anymore.

Her interest rate jumped up 2% in 2 days, and now Claudia doesn’t qualify for her mortgage at all. Time to find a new, cheaper apartment? Well, she’s already signed a contract and forked over $160,000 in cash as a deposit.

Hope it works out, Claudia.

One Woman’s Quest for a Mortgage [NPR]
(Photo:bgilliard)

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  1. pinkbunnyslippers says:

    That’s the name of the game nowadays…I work for one of the big GSE’s (think Freddie/Sallie/Fannie) and we’re seeing a ton of people apply for loans and literally in the matter of a day or two, the lender decides they’re no longer offering that product. It’s a shame, but…I think that this woman most likely has a clause in her contract that allows for her to get her deposit fully refunded in cases like this. I wouldn’t worry. Although it does suck…I’m so sorry :(

  2. Buran says:

    Wait… BUYING apartments!? Wouldn’t that be a condo, then?

  3. Maude Buttons says:

    @Buran: Yes. That’s the point of this post.

  4. alice_bunnie says:

    When we were buying our home 12 years ago we had poor credit. We’d been working with a broker for almost 4 months getting everything straightened out. We’d even “locked in” a rate, that obviously meant nothing.The day before closing they tell us the only product that they’ll give us is an 1 yr ARM at 10% that would go to 13%!

    We went ahead with the purchase, because we were buying from a relative and we’d put her off for almost 4 months. We refinanced the next year for a decent 30 yr fixed. But, it was truly shocking for them to drop that on us one day before closing.

  5. Buran says:

    @Maude Buttons: On my planet we rent apartments and buy condos.

  6. Buran says:

    @alice_bunnie: Can’t you get them for breach of contract since you have the signed contract in-hand?

    When I bought my car the interest rate I was being offered was right there on the papers before I ever had the car keys. If they had then tried to jack my rate they would have been in breach.

  7. DadCooks says:

    And we’re supposed to feel sorry for these predatory lenders.

    We have very good credit and have experienced this “bait and switch” every time we have financed/refinanced homes (6 times in last 35 years). Everything from added points, added “closing costs”, “creeping” interest rates–even with “locks” (read the fine print, most “locks” mean nothing).

    This has occurred with the “big guys”, i.e. Bank of America, Washington Mutual, SunTrust–you get the idea.

    And our wonderful politicians and regulators do nothing to help us “little folks”, just keep raking in the payoffs from the “banker”.

    We are going to end up paying for this mess, just like the Savings and Loan fiasco in the 80s.

  8. CumaeanSibyl says:

    @Buran: As I understand it, the for-real actual mortgage contract gets signed at closing. Most pre-closing contracts you sign with the lender have clauses about “lender can change terms at any time, to anything, because maybe we just don’t like your face.”

  9. CumaeanSibyl says:

    @DadCooks: Yeah, seriously. They’ve been dictating the terms of these loans, they can pull out at any time for any reason, and we’re supposed to blame the laymen who stupidly trust a company not to shoot itself in the foot?

    I don’t feel sorry for people who invest in obviously high-risk stocks and lose their shirts. The subprime market is basically the same thing. Buyers with bad credit are a high-risk investment, and if you’re not sure you can handle a sudden drop in value, maybe you shouldn’t load up on a whole bunch of them at once. Diversify your portfolio, guys.

  10. bohemian says:

    The proper bail out solution for this mess is for the govt. loan backers (HUD, Fannie etc.) to offer a program if people have a good financial situation and one of these lousy loans they will work with them DIRECTLY to get them a new loan. Here is the catch. The current mortgage holder of the careless and predatory loan gets a small portion of the amount to pay off the loan. Something akin to a short sale with the mortgagor being the one who takes it in the shorts, not the homeowner. Only offer it to people who are capable of making normal loan payments on the property under a realistic 30yr fixed rate scenario.

  11. nobodygrrl says:

    She wasn’t applying for a mortgage, she was applying for a home equity line of credit. I suspect that this was done to serve as a sort of second mortgage to allow her to qualify for her first mortgage or to avoid paying PMI. Sure, we all want to buy the houses that we want, but most us who are financially responsible buy the houses that we can AFFORD. Banks aren’t non-profits or charities. It’s not that the bank denied her loan, they just changed the terms to reflect the higher risk. What I want to know is why her non-refundable “earnest money” was $160,000.

  12. WhatsMyNameAgain says:

    You guys obviously don’t live in NYC…

    On our planet, 160k is a normal down payment, and we buy apartments. Everything is an apartment here. We don’t really do condos very much here. Not that they don’t exist… But I think that’s more of a Long Island City kind of thing… Manhattan/Brooklyn don’t really do condos much.

    I see some ad on the Subway all the time.. “7th Heaven” condos in Long Island City… Anyone know what I’m talking about? Maybe those aren’t condos… But I think of Long Island City either way when I think of buying a condo… lol

  13. not_seth_brundle says:

    @Buran: Not every unit for sale in a multi-unit building is a condo. There are also co-ops, for example. “Apartment” is a valid generic term for a single unit in a multi-unit building whether it’s owned or rented.

  14. Allura says:

    @Buran: In the NY-NJ-PA area, most people call townhouses “condos”. If it’s one floor, it’s an apartment, whether rented or owned.

  15. mac-phisto says:

    i love colloquialisms! here’s one for you: what’s a “double block”?

    unless her agent or lawyer was a complete imbecile, she should have a mortgage contingency clause which refunds the deposit in the event she doesn’t obtain a mortgage by a certain date.

    still, this is an excellent example of how the market collapse is going to affect everyone – not just subprime borrowers. even if she was piggybacking a loan, it’s more likely that she’s alt-A w/ a $160,000 deposit. even A-paper borrowers looking for >$417,000 will opt for a piggyback over a jumbo b/c they can often obtain a better rate thru lenders that specifically play the equity market.

  16. rrapynot says:

    I would recommend ING Direct. They are fussy about who they will loan to but they are very efficient and honest in my experience. I’ve done a mortgage and an equity line. Their customer service is in Minnesota rather than India and when you call there is no phone tree. I don’t work for them bye-the-way, I’ve just been very happy doing business with them.

  17. katewrath says:

    It’s not as sexy as the craptastic Boston Globe piece last week, or quasi-Dickensian as this story, but the NYT ran a solid, well-researched piece over the weekend, here: http://www.nytimes.com/2007/08/12/business/12mortgage.html.

    Like many of these pieces, it begins with a non-horror story of someone with a lot of money have trouble buying something that costs way more than anything 80% of all Americans will earn in any 10 year period. But to the reporters’ credit, they finally admit:

    “In the end, he was able to get a mortgage with a lower interest rate, but it will adjust in five years, possibly to a much higher level.”

    The best thing about the piece is the way in which it connects the dots between subprime and other crises.

    For example:

    “It appears that in this case, securities backed by subprime mortgages were owned by people who also owned securities backed by leveraged corporate loans. With the market for mortgage paper drying up, and a need to raise cash, they sold the corporate securities and that market began to suffer.”

    And now you know why corporations are suddenly caught in a credit crunch.

  18. kpfeif says:

    Bah, she’ll get her $160,000 back. If there was a financing contingency in the contract, she can use it. Hopefully she had a lawyer who capped the interest rate in the contingency wording.

    As to her question, “what should I do?” Easy – find a cheaper place. Rent. Move further out.

  19. afq1483 says:

    Let’s say she’s buying a 2-bedroom apartment. In Brooklyn, that could cost as much as $800,000-$1mil so the deposit isn’t too unreasonable.

    A lot of the new apartment buildings going up in Brooklyn and Long Island City are luxury condos, where you get tons of amenities for an outrageous price. I looked at the listings for 7th heaven and Arris lofts and other new buildings and studio apartments are starting at almost $500,000.

  20. @Allura: I live in a one-story condo (not apartment) in southern Connecticut. It’s really interesting how the vocabulary changes the price.

    The two-story above me has one more bedroom and one more bath. It just sold for $100,000 more than mine. I can’t even come close to the NYC prices, but still…That’s nucking futs!

  21. bnet41 says:

    You know, at some point these outrageous real estate prices are gonna start hurting NYC. Companies can’t afford to pay their NYC employees ever increasing salaries forever. Some people here are really overpaid for doing the same job that would cost less to hire someone even in California. This doesn’t even address the inability of service sector workers to find affordable housing.

    I live in NYC and it shocks me what kind of prices people get for stuff. I’m not a fan of rent control at all, but something needs to be done.

  22. Fuzzy_duffel_bag says:

    The feeling I’ve always gotten is that mortgage brokers can change the rules any time they feel like it, but if you ask for any little change, they laugh at you.

  23. rjhiggins says:

    @Buran: Stop being so small-minded. In New York people talk about buying apartments. Just because it doesn’t happen in your little world…

  24. ekthesy says:

    @mac-phisto:

    Isn’t a double-block the same as a “duplex” or the traditional moniker, “two-family home”?

    You must be from NE PA.

  25. bigTrue says:

    It’s not always the bank’s fault.

    A lot of times the Loan Officers the general public deal with screw something up and then have to charge more poits/higher interest to not pay out of pocket.

    I used to work for Wamu in the Wholesale department as an assistant and then an Account Executive. Believe me, the bank doesn’t just raise rates for no reason before closing. It could also be your fault, since most lock’s only last 30 days, and cost more to get them locked for 45 or 60 days. So if you tell the LO “Hey, lets do this! Lock it!” and he does, but then you drag your feet every time they ask you for paperwork, suddenly your lock expire before closing and you have to pay more or you get the new rate.

    Don’t lock the loan until you’re ready to proceed, completely. That means all required documentation. When the bank calls him to say they need additional docs to verify something, move your ass to get them in pronto.

  26. airren says:

    NOBODYSGRRL is correct. She was doing a home equity line of credit to probably get out of buying PMI. She couldn’t afford the apartment anyway probably.

  27. mac-phisto says:

    @ekthesy: rock on! not originally from NEPA, but i lived in the wb for a couple, two, t’ree years. i always got a kick out of the local language while i lived there.

    good catch! next time you’re on the west side, tell richie over at the victory pig that your next tray’s on me.