You can read about my saga with the Wells Fargo Loan Modification department, and you you can read about how angy I am about my tax dollars going to bailout people while I continue to suffer over here.  But, how many of you are happy that you have a 30 year fixed mortgage?  I remember signing escrow papers on our current house and the lady had to do a quadruple take to see that we had a 30 year fixed.  She said she couldn't remember the last time she saw one.  That made me feel good that my parents taught me fiscal responsibility. 

I don't have to watch the news to see the financial crisis the country is in, I only have to turn to my friends that the mortgage companies have screwed.  Or the dozen people I have layed off in the last 12 months, or all my friends sending their resumes out.  I get angrier and angrier by the day about how everyone is hurting.  I feel bad that I still have a job and I have a fixed mortgage that I can afford (for now).  I'm not the one that got burned - or am I?  My last blog about my experience with the Wells Fargo Loan Modification department has generated quite a stir with at least 40 views a day and multiple emails from people in the same boat.  I started to write a new blog about the new economics and another rant about how I'm unable to take advantage of the low interest rates but was side tracked during my research.  I thought of an interesting situation: what if we had bought our current house and previous house with an interest only loan?  

Our first house was a modest 1000 sq. ft. in Southern California.  Interest rates were falling and prices of houses were climbing.  We looked at a house in a neigborhood we liked but decided to wait a few months and save more money for the down payment.  7 months later, the same houses had appreciated $70,000 - not even close to what we had saved (my losses started before I even bought a house!).  We quickly bought a great house in a great neighborhood while we could still afford one.  We had a 30 year fixed mortgage and refied after two years to bring our rate down to 5.325%, wow!  We lived there for about 4 years and then moved across town to a bigger house.  The previous house had appreciated by 100% so we had a good down payment for the new house.  Again, we went in to a 30 year fixed but interest rates were up and we locked in at 6.325%.  In the 7 years we've been paying a mortgage, I calculated that we have paid (hold on to your seat here) $208,000 in principal and interest!  Then I went back to look at the rates we could have got if we went interest only and calculated that we would have paid (only) $128,000!  This means that we have paid $80,000 more by paying principal at a higher rate than an interest only at a lower rate.  That $80,000 is real money, not paper money, not funny math but, actual money that came out of our checking account.

To add salt to the $80,000 wound, since our current house has depreciated enough that we are now upside down, we would have the EXACT same equity in our house if we had been paying interest only.  AND the banks and government would be trying to bail us out right now.  They would be helping us get a better interest rate.

I've never felt worse about my "fiscally responsible" 30 year mortgage until today.  How about the government help those who helped themselves?  All I want is to drop my interest rate to 5% and not have someone laugh at me when I say I have a high rate at 6.325%.  I'm not asking for the bank to lower my principal.

Tell me, why should I stay in my house?  The toughest choice is the right choice here.  If I were unemotional, I would walk away from my house and let the bank take it over.  In about 3 years my credit would be back up and I could buy something new at half of what they cost now.  That's the right move and I don't think I can do it.  We've poured too much time and work to make this house our home.  We're emotionally attached.  But, another year of our house declining and the government and banks pushing me aside and I will be pushed to walk away.  I won't be the only one doing it either.  Watch the economy collapse in to a dark abyss as the fiscally responsible people get fed up and walk away.

Update 8/4/2009:
Mortgage Modifications Moving At A Snails Pace. What a surprise! But, the real story isn't being reported... why isn't anyone reporting that Wells Fargo is hurting people's credit and taking away homes by telling everyone they won't help until they are late on payments? And then, after your credit has tanked, they deny a modification!

Interest rates are the lowest in four years, foreclosures continue to skyrocket, banks continue to crumple, taxes continue to go up and I want some help.  I have a fixed 30 year mortgage with Wells Fargo at 6.375%.  I have never missed or been late for a single payment in the 3 years we've had them.  Same story for the four years in our last house with a different loan.  I'm a wet dream for a bank in this economy.  With all the bad in their portfolio they need me.  Armed with that argument I called Wells Fargo this morning. 

 

After about 15 minutes on hold they took my information and a few hours later a local refinance specialist called me back.  I explained I was looking for a lower rate at with the same 30 year fixed and he told me he could get me a 0 point loan for 5.25%!  I was skeptical since he hadn't actually asked for my account number so I said: "Does that mean we qualify for a conforming loan".  He asked what my principal was and aftwerwards he said "oh, that changes it."  He did some quick looking up and came back with "It's the same rate with the special conforming (under 729k but over 417k), 0 points for 5.5%."  I nicely pointed out that that is actually a quarter point higher and he sort of shrugged it off.  Testing my luck I asked, "Do I have to have 20% equity in the house for that rate?" to which he replied "Yes."  Oops, another strike against him - as with everyone else, I don't have 20% equity anymore.  When we bought the house we put 26% down; zillow now says the house is worth $10,000 less than we owe on the house.  So, I personally have lost over $200,000 in the past 2.5 years and haven't asked the bank for anything.  Armed with yet another piece of this puzzle, I asked the salesman what my options are.  None, nada, zip.  Wells Fargo will not help me out.  He did give me another number to talk to the Loan Modification department.

Fast forward a few hours to the rude people in the Loan Modification department...

I talked with a lady there and started out saying that my interest rate was high and I wanted them to lower it.  She laughed at me and said "did you say it was 'high'".  Assuming she was high (in another sense) I said, "Yes, it's high.  Your bank offered me 5.25% this morning for 0 points but I don't qualify because I don't have enough equity in the house anymore."  She told me there was nothing they could do since I was a good customer.  Seriously!?  "There is nothing we can do because you are a good customer."  What the hell is wrong with the corporate world?  She said I would have to be deliquent on my payments in order to qualify for them to modify my interest rate.  She made it very clear that I have to continue to be a good customer and make my payments on time but that because of that, they can't help me out.

Wells Fargo would rather me walk away from them than help me with a lower payment.  And there isn't a person in the world that cares about my "plight."  Someone from Wells Fargo, please tell me why you want to get rid of a good loan on your sheets because you don't want to give me even a 6% loan?

Why is it that Government will pledge $200 billion to help Freddie Mac and Fanny Mae and another $700 billion to bail out financial institutions but they won't give $25 billion of that $700 billion to the Big Three? Also, why the hell does the government allow $700 billion to be used to help the economy and there is no clear picture of what they will be doing with it.  Everyday they are changing their strategy.  In fact, yesterday Treasury Secretary Henry Paulson said that he believes our major financial institutions have been stabalized so the money won't be going to them.  If they are stabilized then I think we should get our $700 Billion back!

Back to the Big Three bailout: the Democrats are pushing for the bailout while the Republicans are trying to stop it.  I think the reason can be summed up in one word: Union.  Democrats are very union friendly and Republicans see them as a hindrance on business.  The Republicans are saying they won't bailout an industry that isn't making any moves to help themselves.  How about giving them the money they want under the condition that the unions disappear?  Lower the salaries and the costs to build the vehicles will go down which you can pass on to the customers so your sales go up.  There was a time and place for unions but now there are Federal employeement laws that make a union unnecessary.  I bet if you added that stipulation in to the bailout the aisles would flip; Democrats would be calling foul (after all, who pays for their elections) and the Republicas would be in support.  This country isn't ready to get rid of unions so on a more realistic idea, force high MPG regulations on them.  I want to see 40 MPG gas burning cars (not unproven hybrids) by 2015.  If you can't have 50% of your cars meet that by 2015, the government loans come due in full and you will have to sell off your assets to pay it off.  No more long term loans, give them goals to meet.  If they meet the goals then everyone wins.  If they miss the goals then we aren't out of money for too long.

Frankly, I don't think we should be bailing anyone out.  We got to this place because of greed and businesses not being regulated enough.  Elected officials will never make the hard choices and never be firm enough to make this work.  Taking more of my tax dollars and giving to a car company for a car I won't buy (give me 40 MPG and we'll talk) will only delay our problems and will vaporize more money to get there.