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Back in October, interest rates for mortgages started to fall precipitously. They eventually reached a low of somewhere around 4.5%. It was at this point that, at the urging of a couple of friends of mine who are much more financially aware than I urged me to refinance my mortgage.

Back in 2001 when I got my mortgage, the rate was 6.875%. I did some calculations and found that I could nearly halve my monthly payment. Since my company did not give out merit pay increases last year but everything else went up in cost, saving any sort of money is a good thing.

I got a recommendation of a reputable financial institution with good rates from one of those two aforementioned friends and started the process of a mortgage refinance. I had the rate frozen at 4.625%, which is not too bad.

Then began the long process of proving to the bank that I had enough money, was employed, had a decent credit rating, etc.

One of the final steps was scheduling a home appraisal. My target value of the house was $173,000, because the amount I still owe on my current mortgage is approximately 80% of that number, which means I wouldn't have to pay PMI. Since I bought it in 2001 for $165,000 and it was worth more than that at the time (the sellers were highly motivated to sell), I thought it was a lead-pipe cinch, as the saying goes. <ominous chord> Whoa. Did you hear that? It sounded...ominous. And chordy.

Meanwhile, I had my roof repaired to fix the damage from the September Monsoon. We scheduled the appraisal for the Monday after the repairs would be done so that she (the appraiser) would see the house in a better state.

She came. She appraised. She took pictures. She measured. She promised I'd get the report in about a week. She left.

A week goes by. But in the meantime, I have become very ill and am taking medication that makes me a bit loopy, and on top of that, I'm participating in NaNoWriMo, so it sort of slipped my mind that the report should have arrived on the Monday of Thanksgiving week.

Yesterday, I realized I'd heard nothing from her, and contacted my loan guy at the bank to see if he had, and I asked him if there was anything else he needed from me to proceed.

He forwarded me the email he got from her (I did not get it), apologizing since it was obvious I hadn't received his earlier email.

Turns out the house appraised at $150,000. Considerably less than my target of $173,000, and about $30,000 shy of where it should be.

This lowered the amount they were willing to loan me by $20,000, which means that I would now have to pay $20,000 down in order to get the refinance.

The whole purpose of this refinance was to save money, not blow my entire savings. It would take me > 5 years to save $20,000, and...well, it's just not worth it.

What caused the devaluation? In a word: neighbors.

I am a good mortgage-holder. I have paid every payment, never missing a single one, including during the time I was unemployed (Thanks to my mother!). I've been late a few times, but not by more than a few days. And once I was able to schedule the payments via online banking (several years ago), not a single payment has been late. This doesn't matter.

My house is in good shape (as far as you can tell by a cursory inspection; more on this in another post, perhaps) and I have added value by re-siding the house in HardiPlank and had the roof repaired. This doesn't matter.

I have a "very good" credit score. This doesn't matter.

I have no outstanding debt other than the mortgage, and a home equity line of credit that is currently paid off, and which I'm only keeping open because if I close it, it makes my credit score go down.1 This doesn't matter.

I pay off my credit cards every month in full, carrying no debt from month to month. This doesn't matter.

I am gainfully employed and this situation is not likely to change in the near future. I have proven that I can pay $X/month for my mortgage for nine years even during the 21 months of that I was unemployed. This doesn't matter.

The only factor that made a difference is that 20% of the homes in my neighborhood have been foreclosed. When the bank forecloses a mortgage, they offload the property for a fraction of the actual value, thus causing the property to lose value by default. And since 20% of the homes in my subdivision have lost value, the others lose value by proxy.

To sum up: because my neighbors were unable to pay their mortgages2, I got screwed over.

The irony, of course, is that I would obviously—to anyone with a single working brain cell—be able to make lower payments each month. But because the appraiser basically gave me the purple shaft, I get screwed over financially.

When I worked through all this in email with my loan agent at the bank and realized what it meant, I was pretty much beside myself with rage, frustration, and no small amount of moral outrage. None of this is my fault. I did nothing wrong. I made a post to Facebook3 that said
just received some very frustrating, infuriating financial news. And he is SO FAR BEYOND PISSED OFF that there isn't a word in English. More later. For now: silent fuming.
I composed a Facebook note that consisted largely of the F-bomb interspersed with epithets about my neighbors and their supposed incestuous origins. I'm not overly proud of it, and I'm glad I decided to wait until I cooled down to say any more.

Because under the light of a new day, I can calmly see that nothing has actually changed. I'll still be making the same mortgage payments I've been making for nine years. I'm still being paid and am gainfully employed. I'm not thinking of selling the house any time soon, so the fact that it's worth $30,000 less than I expected is, while not a pleasant thought, not the end of the world.

Granted, I won't have ~$500 more per month to use at my discretion like I've been planning. But that's all that has changed. That, and I know my credit score, the actual value of my house in this down market, and exactly what I need to go through when I try this again in a few years.

So, there you have it. I put this here to preserve it for posterity and to put a link to on Facebook to explain the extremely frustrated post I made yesterday evening.
  1. Have I ever mentioned how much I loathe the entire "credit" industry?
  2. As much as I want to call them names and sling mud and curse and gnash my teeth, I realize that for most of them, it wasn't their fault any more than this was mine. Very few people choose foreclosure.
  3. Generally speaking, if I can say what I want to say in 140 characters or less, it goes to Twitter. If I can say it in 420 characters or less, it goes to a Facebook status update. If it's a quick-and-dirty, straightforward message bigger than 420 characters that I can type, edit once, and press "send," I put it on Facebook in a note. If it's going to turn into a dissertation with footnotes or, for whatever reason, I feel the need to save it for posterity, I put it on LJ. Don't you feel privileged? :) (Or if I want only a subset of people to see it, I put it on LJ and change the security level to something other than "public.")

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( 6 hisses — Hiss at me! )
Dec. 1st, 2009 07:09 pm (UTC)

There's one possible silver lining to this...what valuation is the county using for your property taxes? If it's substantially above $150K, you may be able to get your property tax reduced by challenging your assessment. It won't save you $500/month, but it might be something.
Dec. 1st, 2009 08:56 pm (UTC)
You've reframed it nicely...
You haven't really lost anything...things are the way they still are. Hopefully you can get any application fees back.

We refi'd, and ...true, our payments did go down, but the hassle and then the FEES for doing it cost us some money... so even if things had gone as hoped, you may have found yourself on the hook for $2K or more just to complete the deal, too. :P

If you make 13-14 mortgage payments a year, you can end up saving a ton of money too (which is easier than the refi but won't lower your payements any, alas.)

Dec. 2nd, 2009 04:03 am (UTC)
That's an argument for programs that would prevent foreclosure. Lucky if the devaluation is just on paper -- some neighborhoods have foreclosed houses vacant getting vandalized.

/bemusedoutsider here/
Dec. 3rd, 2009 02:14 pm (UTC)
Becuase the mortgage industry made tons of stupid loans to people who couldn't repay them, housing prices went up like crazy, and people who bought houses they could actually afford (like me) got smaller, older, more beat-up houses than those who went nuts.

My brother's house is being foreclosed. He and his wife have done *everything* wrong that they could as individual borrowers. Yet for the last five years they've lived in a new house, with new floor, no lead paint, no asbestos, new appliances, and no hassles. Karma for them means that now that they've lost that house, they're living in a brand new rental townhouse, with granite countertops, all the fancy bits of trim, new appliances and a landlord who'll fix things.
Dec. 3rd, 2009 02:28 pm (UTC)
It gets worse
Where do you think the money comes from to handle the "loan modifications" that our dear leader is blackmailing banks into offering "homeowners" (Anybody who does not have a significant down payment is a renter with complex paperwork, not a real homeowner). Yep, those of us who did NOT overextend ourselves are now footing the bill for those who cannot do basic math.
Dec. 10th, 2009 04:05 pm (UTC)
Re: It gets worse
Hm. Odd. LJ did not inform me I had comments. :-/

I don't think it's even a case of not being able to do math. From what I understand about what happened, everyone quite willfully threw out all their common sense and was given blanket permission to lie, cheat, and steal.

And it bites you and me in the ass because we aren't fucking morons.
( 6 hisses — Hiss at me! )

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