Bernanke tries to re-fi his mortgage, fails

[onyx1]

http://www.bloomberg.com/news/2014-10-02/you-know-it-s-a-tough-market-when-ben-bernanke-can-t-refinance.html

 

“I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions,” he said.

[merkhet]

I saw that! Thought it was pretty funny.

[Phaceliacapital]

Such a lie, he probably has the cash to pay off his mortgage in one of his petty accounts.

[ERICOPOLY]

Such a lie, he probably has the cash to pay off his mortgage in one of his petty accounts.

 

Who is lying about what?  I don't understand your comment.

 

In America, mortgages work differently than what you are used to in other countries.

 

Here, they give you below-market interest rates if you are subprime, and if you are really wealthy they turn you down as a credit risk.

 

It's just the way things work.

 

[yadayada]

he should have checked if there was some cash left in his helicopter.

[ERICOPOLY]

Let's say you are self-employed (but new in that position as he is), and you have $3 million in cash.

 

Let's say you want to refinance a $2 million mortgage.

 

I'll bet you'll get turned down.

 

They'll take your $3 million and try to create an income stream from it.  They will claim the income is not enough (debt-to-income ratio) to support the mortgage.

 

It doesn't matter if you have enough cash to pay off the mortgage in full.

 

Even if you have enough to put 50% down so the mortgage can't possibly be risky, they'll still say no.

 

They don't do things logically anymore -- they just do things in a way to avoid being fined by their regulator. 

 

That's what's so damn funny -- they won't even lend to their regulator if he needs a mortgage (or recent regulator in his case).

 

I'm glad the dummies who made up all these rules have to live with them too!  It's like their own little purgatory.

 

His cash invested at these low interest rates (that Ben himself created) is what's preventing him from showing he can earn a large enough income from the cash.  These low rates have frustrated a lot of savers, and this mortgage debacle is just one of those frustrations (the other being a lack of suitable income from the cash).

 

I forgot... they also "haircut" your assets when you try to qualify.  So if you have $4m and you are trying to borrow $2m, they'll claim you only have $2.8m of qualifying assets (after applying a 30% haircut).  Then that $2.8m can't possibly support $2m of debt in their eyes, so they'll turn you down.

[Tim Eriksen]

The crazier scenario is if the the $3 million was in stocks and generated say $500k in capital gains each year for the past two years they would not include it since capital gains are deemed non recurring.

In my last refinance they excluded my investments in my hedge fund and I only found out when they said they wanted to see more savings.  Their reasoning for excluding them was because anyone could make up a statement like the fund's.   

[AchilliesValue]

The bigger problem is that the non-agency securitization market is basically dead right now so if you don't fit into the Fannie and Freddie rigid criteria there's little chance of getting a mortgage. Snce banks can't hold your mortgage on their balance sheet your basically shit out of luck. That market will eventually come back but it hasn't yet.

 

You guys that have had problems and live in Cali or the Northeast should try First Republic. I've found they basically built their business filling this void of investment professionals that have lumpy income. Thus why they have some quarters where they have $0 in charge offs.

[ERICOPOLY]

I'm now approved for 3 mortgages and there is some haggling going on.  The first mortgage approval came in at a 5 yr ARM -- brokered by a guy who works for one bank, but the loan he found for me was actually with another bank.  Then a second mortgage approval (from yet another broker) came in on a 7 yr ARM with 150 bps lower rate than the 5 yr ARM.

 

Then the first broker let me know that the bank offering the 5 yr ARM offered to drop their rate by 26 bps if I was willing to order loan docs right away.  Of course, he let me know it was only because he called their vice president and that they don't normally make exceptions, etc.. etc...  So I said no.

 

At this point, the broker who had arranged the 5 yr ARM reminded me that he also worked for a bank and that his buddies in the bank were going to help him out by rushing a loan approval for a loan that meets the same rate as my best option, but still on a 5 yr ARM rather than a 7 yr ARM.

 

All along, the 5 yr ARM is 2.17m and the 7 yr arm is 2m.  The rate on both has been haggled down to 3.75% with no points.

 

He then asked me if I was willing to close right away, order the loan docs etc for the 5 yr ARM.  I reminded him that 3.75% on a 5 yr ARM isn't the same as 3.75% on a 7 yr ARM.  So asked him what the spread typically is.  He said .125% to .25%.  So I told him I wanted it to be a 5 yr ARM at 3.5% with no points and 2.17m.  That was yesterday and he said he'd go push for it.  So now I'm waiting for the phone to ring with the news.

 

A couple of takeaways:

1)  I had no idea how much of a middle-eastern market place this business is

2)  I feel like I'm hitting a pinata with that first broker/bank -- their first offer clearly wasn't their best

3)  It's like shopping for a car -- you threaten to walk off the lot and he goes in the back to talk to the manager and comes back with some sort of "special approval that they don't normally do".

 

I'm not going to post the names of the brokers or the companies.  I just thought I'd share the experience.

 

I plan to take the 5 yr ARM if he comes back at 3.5%.  That allows me to keep the $170k invested for 5 more years -- the 7 YR ARM has opportunity cost which makes the rate for years 6 and 7 higher than they first look.

[Grenville]

Interesting color, thanks for sharing.

[sswan11]

I'm applying for 1st mortgage for house I bought in Seattle yesterday.  Here are yesterday's Bank of America "best" rates.  I'm trying to decide what mortgage term to choose:

 

30 year fixed:

 

Was 3.875% with $944 credit.  It’s now 3.875% with $2,657 credit.  Or you could do 3.750% at only $424 cost.

 

15 year fixed:

 

Was 3.125% with no cost or credit.  It’s now 3.125% with $1,052 credit.

 

7 year ARM:

 

Was 3.375% with no cost or credit.  It’s now 3.375% with $944 credit.