Blood Money

Things seemed okay with the Washington Mutual mortgage. I made each monthly payment on time and enjoyed the pick and pay feature because I could pick the low number, but WaMu seemed very big on direct mail solicitations. They sent a lot of stuff. I’d rigorously checked the “do not call’ box in my documents, but there didn’t seem to be a “do not mail” option. I guess they needed to be able to contact you somehow or other. As time passed the direct mail solicitations increased, sometimes with two or three offers a week arriving in the mail. I didn’t read them at first as they all seemed to focus on me paying WaMu some lump sum in order to “fix” my interest rate. The lump sum was large, over $3000.00, and that alone stopped me from reading further, plus I was busy with work and simply exhausted.

The exhaustion turned out to be more than routine fatigue. Over a twelve month time frame my hemoglobin dropped to 4.3 and I received seven blood transfusions. In retrospect I wasn’t thinking straight, but I was thinking about my credit scores and the possibility of identity theft because my scores were not great. I had no credit cards other my American Express card and after refinancing I’d barely used it; when I did, I paid in full – there was no outstanding balance. There were also no car loans, no student loans and no department store credit cards, in fact the only card I did have beside American Express was my debit card. Yet my credit scores were low and getting lower each month. It didn’t make sense. I met with a local banker to understand why my scores were so bad and he explained it to me in no uncertain terms. I was in a pick & pay loan and each month that I did not pay the full amount, my loan amount increased – I was creating and experiencing negative amortization. Even if I immediately stopped picking the small amount and starting paying the full amount, my credit score would improve very little, due to the questionable nature of the pick & pay loan. This was an eye-opener; negative amortization was a new and scary addition to my vocabulary.

That’s when I started to pay attention to the Washington Mutual direct mail solicitations.

I also started paying the full mortgage amount each month (the principal and interest) and even made some headway on chipping away at the negative amortization, but now that I was focused on the mortgage I could see that when the loan adjusted, the interest rate was going to jump and the full amount was going to increase big-time. It was already a reach to pay in full. The solicitations continued, with a diverse array of offers and incentives, but the bottom line was always the same: pay WaMu “X” amount in a lump sum for the opportunity to “fix” your interest rate before it’s too late (and the rate adjusts up).

I obsessed over the impending rate adjustment and thought about how to make more money. I picked up a freelance job in addition to my full-time job, had more yard sales, sofa surfed while renting my home for a month in the high season, baked for a local coffee shop and finally resolved my health issues, although it would take time to become truly fit again. Things were looking up and I started a new job just after Labor Day 2007. This position was with a small, new company and it paid well, at least well enough for me to make the full mortgage payments. I thought about re-financing and saw there was a penalty for anything before the 30 month mark; the interest rate adjustment loomed large yet the penalty to re-finance was prohibitive. I was stuck between a rock and a hard place.

The Washington Mutual solicitation continued, with a curious twist – the lump sum amount to “fix” the interest rate kept dropping, and was now more in the $1200 range. I called for information but deferred on a decision. Washington Mutual redoubled the direct mail efforts and started calling (with my permission) with a new sense of urgency – IF I acted before December 31, 2007, I could get in on a very special deal. I passed, but by January 2008 I could see that rates were only going up. I needed to lock in on something or this mortgage would be out of control.  In February 2008 I folded and paid Washington Mutual $995.00 for the privilege of locking into a 5/1 LIBOR Interest Only ARM at 6.62%. What the hell was I thinking? I have no idea. I remember the notary calling, offering to meet me in a Starbucks so we could sign the papers. I imagine now they would have sent a notary to the moon to get my signature. But it’s my decision, my responsibility and I own it. All done to preserve my credit rating and keep on top of things… if I only knew then what I know today.

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