Inside The Box

Posted on April 16, 2010 by Cooler By A Mile

Please explain:

In May 2008 my salary was reduced by 50%. I have supplemented my income with freelance work but am unable to obtain full-time employment at my original salary or supplement enough to reach my original salary and honor my mortgage obligation.

I continue to seek full-time employment at my old salary without success.

I am only able to make payments by using savings; those savings will soon be depleted.

I seek a reduction in interest and a modification to a fixed 30-year mortgage. This will enable me time to obtain higher-paying employment and allow my savings to last longer to meet my mortgage obligation. I have no desire to sell my home.  

I moved on to Number 10. “Would you prefer to keep your home or sell it?” I checked Keep my home.  Number 12. “Do you have any other loans on the home?” I checked No. I completed the remainder of the form, painting the best possible picture about how much my home was worth, how little I owed relative to its value and how frugally I lived. Then I gathered the requisite paperwork (a full 34 pages) and headed out to make copies and send my application by Certified Mail to WaMu Home Preservation. It was February 18, 2009.

On February 24, 2009 I phoned WaMu. The packet had been received. A file would be created, reviewed and checked for missing items. Then, a processor would be assigned. I was advised to call back in 7-10 days.

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WaMu Cares

Posted on April 15, 2010 by Cooler By A Mile

Searching here, searching there, searching almost everywhere – four long months of searching for another job, any job and on the eve of 2009, an actionable New Year’s resolution to redouble my employment search efforts – my current income (50% salary reduction) had put me back to what I earned in 1989. Sherman, time to re-set the wayback machine. An aside – the effects of underemployment are not just financial but psychological. It’s very depressing. That said, in the world at large unemployment was rampant and the fact I still had a job, even at a dramatically reduced salary, was something to be happy about. Put up and shut up. I worked as many freelance hours as I could but it became apparent that using my savings to supplement the mortgage payments was going to be a much longer term remedy than I’d envisioned. I needed a way to stretch my savings as long as possible so I could continue to meet my mortgage obligation while seeking more rewarding work. The solution: apply for a mortgage modification.

Washington Mutual had a web site with a Borrower Assistance Form and the notation “We’re in this with you. We offer options for resolving your home loan issues.” They offered a two page form that was easy to download and complete. The tone was upbeat and helpful, with phrases like “Thank you for taking steps to resolve your home loan issues!” and “We’ll contact you soon!” Even the mail drop was designed to ensure confidence and optimism: WaMu Home Ownership Preservation; yes – this was the solution I’d been seeking. Home preservation help was within my reach.

Numbers 1-8 on the form were the standard address, phone and account number sort of queries, while Number 9 asked: “Why are you having trouble with your home loan payments? Select all that apply:” The answer was simple; only one box applied to me: Reduced Income. The multiple choice section was followed by an empty white box titled: “Please explain:”    

So I did.

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Chase the WaMu Bait & Switch

Posted on April 15, 2010 by Cooler By A Mile

Even as I signed the modification with Washington Mutual I felt niggling questions…why was the payment so high? Over $6600.00 a month is an awful lot of money, but I guess that’s what I needed to pay to clean-up the negative amortization and improve my credit rating.

And we all know your credit rating is almost as precious as your virginity – it must be kept intact.

So pay I did. I paid the February and March payment not only on time, but added in extra money towards the principal. I was making decent money in my new job and aside from this mortgage, my expenses were minimal. I could actually see the loan amount getting smaller. This was a good thing. Of course all good things come to an end, although the end was more abrupt than anything I could have imagined. On March 25, 2008, my new employers informed me they had radically underestimated the operating expenses for the business and they simply could not afford to pay me, the sole employee other than a part-time clerical person, the salary I’d been promised. Effective immediately they needed to implement a 50% salary reduction. I’d been paid for March and had thirty vacation days, so I could get paid another month at full salary but after that, as of May 2008, my salary was cut in half. Not a wage freeze or a 10% or 20% reduction, but a 50% salary reduction.

With only six months in the job I knew if I started a full-on job search people would think I’d done something wrong and that I was a job-hopper or a problem employee. Not good. I had to suck it up, at least until September 2008, when, with a full year on my resume, it wouldn’t look so bad to seek a new job. I had some non-retirement savings, about $60,000, having sold a second home, so what I could do each month was supplement my reduced earnings by dipping into the savings, thus keeping the mortgage current, continuing to reduce the principal and improving my credit rating. And it actually worked, for a while. I took on more freelance work and in order to keep everything going, rented my home again for a summer month and even took in guests while I was in residence.

In September 2008 my official job search began, and I joined the ranks of countless 50+ year-old baby boomers seeking a senior-level, high-paying job. Something else happened in September 2008:

WaMu Assets Sold to JPMorgan in Record Bank Failure  

Sept. 26, 2008 (Bloomberg) — Washington Mutual Inc. was seized by government regulators and its branches and assets sold to JPMorgan Chase & Co. in the biggest U.S. bank failure in history.

WaMu became “unsound” after customers withdrew $16.7 billion since Sept. 16, the Office of Thrift Supervision said yesterday. Branches are open today and depositors have full access to their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said.

The failure of WaMu, which has $188 billion in Deposits, ratchets up pressure on lawmakers to piece together a rescue package for the nation’s financial system. The government’s inability yesterday to reach agreement on a bailout and the seizure of the biggest savings and loan sparked a sell-off of bank stocks, led by a 27 percent tumble in Wachovia Corp…

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Blood Money

Posted on April 15, 2010 by Cooler By A Mile

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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McMansions, Hummers & Hubris

Posted on April 15, 2010 by Cooler By A Mile

So here’s the deal about a house in Avalon – once an upper middle class, predominantly Irish-Catholic resort town populated with modest homes, station wagons and moms down for the summer with a gang of tow-headed kids taking sailing lessons and pedaling rusty bikes, at some point in the late 90s it went ostentatious, Philly-style. Older homes that once housed multiple generations and extended family were razed to build giant plastic trophy houses complete with elevators, palladium windows and more bedrooms and baths than a boutique hotel. Air conditioners hum 24/7 in the hermetically-sealed houses as late-model BMWs and high-end SUVs glide in and out of garages, the unseen inhabitants always behind glass. No one is outside except for the service people: landscapers, lawn crews, house cleaners and pool boys; the hulking monuments sit empty ten months out of twelve. So there’s little sympathy to be had when you tell someone about your home in Avalon and how you need a loan modification.

What I can say is this: I mow my own lawn, clean my own house, maintain and repair my aging wooden docks; I have an annual yard sale and go to yard sales year-round to hunt for bargains and I live for bulk trash to reuse, re-purpose and recycle.  I don’t have air conditioning, a television or a new car – the cars I do own were bought used and each has well over 100,000 miles; they’ll be driven until the wheels fall off. I’ve always had a job, usually more than one, and I’ve been gainfully employed for over 35 years; dutifully making mortgage payments for over 25 years. Where am I going with this? Not everyone who needs a loan modification bought more house than they could afford, lied on their applications or lived large. At least I didn’t.

In retrospect, what I did do was stupid, but it was done with the best of intentions. After many years working in any and every state except my home state of New Jersey, I got a job in Cape May County, ten miles from my home. The prior four years had been a struggle to make ends meet so I’d run up a little credit card debt with American Express and the rate on my existing mortgage was high and set to increase. It was the right time to consolidate and re-finance, and it was not especially easy. My mortgage broker recommended a program with Washington Mutual, a first-class, very reputable bank that didn’t grant mortgages to just anyone. Indeed, we jumped though many hoops, including writing a letter of intent regarding the purpose of the loan, the fact that I now had a great job “at home”, wished to clean up a small credit card balance, etc., etc. It was a stated income, asset-based jumbo “no-doc” loan, with an awful lot of documentation; in fact, this is when I learned the importance of copying and submitting EVERY page, even the pages that say “This page intentionally left blank”. 

After reams of paper went back and forth, one happy day the mortgage was granted and paperwork signed. My mortgage broker explained the fascinating aspect of this loan – you could “pick & pay” the amount you wished to remit each month. And yes, the interest rate would re-set once a year but that was no big deal, because after 30 months you could re-finance and the way things were going, that would be a no-brainer. The no-brainer in the room was me, a lesson learned much later.

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Barn-raising

Posted on April 13, 2010 by Cooler By A Mile

Welcome to my world. At the moment it is very small and focused on only one thing – keeping my home. It used to be a much bigger world, especially back in the 90s when finally, after working since the age of sixteen and saving virtually every penny earned, I was able to achieve my dream of having a house “down the shore”. Even that was not as neat and orderly as it sounds; as in so many stories, there were twists and turns along the way.

I wanted to buy an old house, not build one, but after searching for years, writing letters and even knocking on doors of the remaining bay front homes still rich with character and charm, it became obvious the last ones standing were much-loved and not for sale. In 1998 I bought a 60’ x 110’ plot of land in New Jersey on the seven-mile barrier island shared by Avalon & Stone Harbor, a plot on which there had never been a house. For a while I tried to move an old cottage onto the lot, but cottages were few and far between and the lot had two beautiful trees that would need to go in the face of a house, even a small cottage, being dropped on site.

My next idea was to hire an architect to re-interpret and design for me a riff on a Craftsman bungalow I’d rented for several years, a real charmer with porches and gables and knee walls. The architect and a very capable builder were hired and we were good to go – until I lost my high-paying job of eleven years. Sitting at home stewing and reading newspapers, I tried to figure out what to do next in my life. While perusing the classifieds in a local paper I saw an auction ad – it included two barns that were to be dismantled and moved in order to clear the land. I went to the auction preview toying with the notion of buying one of the barns, dismantling it and moving it to my lot on the bay. My architect and builder were called in to review and endorse this idea; instead they politely pointed out the barns were termite-ridden and if I really wanted a barn, they could build something designed to withstand salt water and bay front weather.

A barn was sketched on a cocktail napkin, turned over to the architect for engineering plans and off we went. As the house took shape, I developed a concept that evolved with the construction: somewhere there was a “big house” owned by a moderately well-to-do family living in the 50s and 60s, and as they improved the big house, the cast-offs were relegated to the barn. Things like a cast iron skirted tub from the 20s, a GE monitor-top refrigerator from the 30s and a Chambers range from the 40s. Each of these components and many more vintage features were integrated into the home, with a master carpenter on-premises for over a year. I went to San Francisco for another big job, flying home on weekends to supervise construction of my beautiful barn, leaving post-it notes and books filled with barn details and other inspiration scattered amongst the construction. The house was completed in May, 2000 to critical acclaim. It is not reflective of the McMansion style of building overtaking Avalon and Stone Harbor.

The house was featured as the cover story in the September-October 2001 issue of Coastal Living magazine. It was also featured in The Avalon Garden Club Tour of Homes in September 2001.  

In 2006, the house was included in the book Island Living by Linda Leigh Paul. Island Living was published by Universe Publishing, a Division of Rizzoli International Publications, Inc. 

In July, 2008, the house was part of the Jewels of the Island Avalon Yacht Club Auxiliary 12th Annual House Tour and Luncheon.

The footprint of my home is 19.5 ft. x 30.0 ft. The house sits on pilings 11 ft. above ground atop a 360 degree deck. The first floor features a galley kitchen, an open living/dining area and the bathroom. The second floor consists of two bedrooms.

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