As the old Leonard Cohen song goes, "It's two in the morning, I'm writing to say that I'm better..."
Well, it is 2:39 am to be exact and I am having a bit of insomnia. My mind is working overtime due to many issues I have on the table at the moment. The main one was a recent shock when I had the little house I've owned for 15 years appraised for a refi. I knew things were bad and the house had decreased in value, but I had a vague idea what it was worth based on the taxes. When I received the bottom line, it seems my house has plunged 50% in value over the years I've owned it. The saddest part? The major plunge has been between 2009 and now.
What this means is I am approved for all practical purposes to swap out a high interest mortgage on said home for more than I owe (based on credit worthyness and my net worth apparently), but I do not have the value in the home for what I need. I am about 7K short of what the bank will loan me.
Now, it seems I owe exactly what the house is worth. Good news, I suppose, as I am not "upside down"...yet. However, because I no longer live in this house and it has become an "investment property" (yea, some investment...the rent my tenant pays barely covers the current mortgage payment and nevermind the INCREASING taxes and insurance) due to be unable to sell it, the bank tells me they will only give me 75% of the value of the home. I spent about $400 (appraisal and credit check costs) to find all of this out.
I called the current mortgage holder and explained to them my situation. I have a balloon loan on this property (bought when I was a Very. Stupid. Girl in my early twenties) that is about to come due. I have been a good payer (on time) over all these years and never refinanced from the original mid-nineties interest rate (i.e. criminally high). They said they would take the 75% as a payoff with no damage to my credit. "Yay!" I thought foolishly.
So I called back the other bank (one, I might add, I have another mortgage with, have had loans that are now paid in full with, savings, checking, relatives that work for them, relatives that bank with them, a bank that started in the small town I live in now) and told them what my current mortgage holder has said. No, says my bank, if you don't pay exactly what you owe it looks bad to us and we won't loan you the money. Um, OK.
Of course, I am not happy on many accounts, but what really pissed me off was the loan officer's patronizing speech after I told him about the other banks offer to me. He says, "What if you borrowed $50, 000 from your friend Bob. However, two years later, the value falls on the house and you go to him and offer him $48,000 to pay it off. Wouldn't this just be wrong? How do you think your friend would feel?" He then went on to say the houses losing value was all our faults because the banks had lost money in the stock markets. Make sense? (Please elaborate if it does to you...:(
Well, let me see, in my case I owe $25K and have paid "Bob" faithfully for 15 years at a high interest rate. My friend "Bob" has already received his original investment plus some from me. A profit!! And, I am offering to pay back 75% of what is now owed on a house he is just going to get back and will have to sell at a loss if I can't finance it (in the scenario) and it is his decision to take the offer. Hmm, his 25% loss now is really, really small.
After my little scolding, the banker then went on to say something about how "short sales" are only hurting investors and that those who do it are basically stealing from the banks. I hadn't even considered the other bank's offer to be a short sale. Just an offer for less (win win for them).
Anyway, I am thinking about moving my other mortgage (great interest rates now anyway) and all my accounts out of the patronizing bank. I am asking to borrow less than a car from them. I am asking to borrow exactly what is owed and apparently what the house is worth by the appraiser they hired. I have an excellent history of repayment. My credit is good by whatever weird and complicated formulas they use.
Meanwhile, I am paying all extra money on the little house in preparation of the upcoming balloon due date (June 2012). I hope to have it paid down to 75% of what the worth is (today), but who's to say it won't get worse. And, trying to live in two cities with today's recession has become a money-tight affair these days. We all have net worth less than we did five years ago. Fucking hindsight, I should have paid this damn thing off years ago (I always held out in foolish hope that it would sell).
O, and the negative value, it was not the house per say; it was the comp values of other homes selling in the neighborhood for pennies. Kind of out of my control if people are taking way less than their houses are worth these days. We are all just trying to survive.