mortgage

the dow

By Bill Starrels

November 2008

It wasn’t that long ago when the Dow was over 14,000, people couldn’t buy homes fast enough and mortgage brokers were treated like rock stars. Ah, the good ol’ days…

Remember the time when you knew your mortgage guy or gal by their first name? Those days you used to give out the mortgage cards instead of your own at parties?  You even called on a regular basis. The calls were like clock work. 

Here are some examples of typical calls. “Your rates should be out by now, rates must be even lower than yesterday; is it time to lock in?”  Others were like this – “I bought the house over six months ago! My neighbor just sold the same sized house, but nowhere as nice as mine – for a hundred grand more then I paid! Wow, how much cash out can you get me on this refinance?”

People who had trouble qualifying for car loans in previous years were buying $400,000 homes in the area.  No pay stubs? No problem. No Taxable income? No Problem. Credit a little dusty? No problem! No down payment? No problem. Need a 100% loan? No Problem. Wow, what a country this used to be.

A typical Sunday open house resembled an old Russian bakery with people waiting in line to by bread. No listing was priced too high. Come Monday there would be multiple offers at tens of thousands over the list price.

Well, that was yesterday. All good parties sooner or later come to an end. Yes, if you drink too much Kool-Aid you do get hung over.

Here is an example of client calls these days. “Hello, Sir I would like to refinance my home. I am having trouble with the payments. I bought it in 2006 for $600,000. Heck, I out bid the next highest offer by $30,000! Can you help me?”

“Mr. Home Owner I need a couple of things.  First, I need a couple of pay stubs? May I have your tax returns? Fax them to me and I will call you back.”

Here is the returned phone call:

“Hello, Mr. I paid $30,000 too much for his house, – I have a couple of issues I need to address with you, good news and bad news.  First the good news, your tax returns indicate you owe nothing – zip, because you show no net income. However, these days you need to show income to qualify for a mortgage. Sorry.  You want the bad news? OK – I checked values on Zillow.com and your home is now worth $400,000 and is losing $5K a week in value.   You happen to owe $600,000 because you took out a 100% loan…  We don’t do 150% LTV refinance loans. Even in the Wild West days you would be out of luck. Sorry. Look at the bright side; you don’t have to worry about paying any capital gains anytime soon.”

I had one phone call this past week where the condo owner asked, “where can I leave the keys?” 

One has to look forward to the days when the market returns to some form of normalcy. Don’t expect the wild and crazy times of a couple of years ago. But a more fluid market with people buying homes at sensible prices with real income is not too much to expect.

Bill Starrels lives in Georgetown. He is a Senior Loan Consultant. He can be reached at 703 635 7355 or by email: bill.starrels@gmail.com

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