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Who owns my Chase home mortgage loan?

May 12, 2010: The whole mortgage-backed security issue has been sticking in my craw, underlined by the fact that Washington Mutual had taken advantage of me not once but twice. First when they lured me into a Pick & Pay loan which exposed me to negative amortization, and then when I’d realized what a bad loan it was and wanted to dig out, they “modified” my loan with an equally unfavorable streamlined refinance. I wanted to review each and every document in this predatory mess, but I wasn’t exactly sure where to start. 

I went to the RESPA site http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm and read everything I could find before placing a call to Customer Service. My questions were surrounding the fact that my loan was not Freddie Mae or Fannie Mac backed; did the RESPA rules apply? The rep didn’t know but she told me to call RESPA at (202)708-0502 in Washington, DC and ask an expert. I called and left a voice mail and a while later Angela Collier (202) 402-6135 returned my call. She was extremely helpful and directed me back to the site to walk me through how to submit a “qualified written request” and showed me the sample letter http://www.hud.gov/offices/hsg/ramh/res/reslettr.cfm  format I needed to follow. Ms. Collier suggested I copy her when I sent the letter and that I consider copying my state Attorney General’s office as well as the state FTC. She knew her stuff.

She listened to my concerns and told me exactly what documents I should ask for, especially when I told her I was convinced the loan had been sliced and sold off as a mortgage-backed security. I shared my suspicions that perhaps this was why I was could not get loan modification answers from Chase. Ms. Collier said that Chase would have twenty (20) business days to respond and I should call her to follow-up. I said if Chase responded in twenty business days it would be a first! They hadn’t responded to my OCC complaint which was over 60 days old, nor had they responded to my letter to David Lowman Chase Home Lending CEO.

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Chase the WaMu Bait & Switch

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…

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.

McMansions, Hummers & Hubris

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.