Ask Eric!

[Kraven]

If you haven't already, you should check out a couple local community banks.  Being able to sit down with the person making the loan might make all the difference.  The larger lenders are going to just be checking boxes.  There isn't a lot of flexibility.

[cubsfan]

Perhaps you considered this route, but just in case:

 

I had the same type of issue 18 months ago with Chase. I felt it was totally ridiculous.

So after 90 days of screwing around with Chase - I moved on even though I was

approved for a lower level mortgage.

 

But I have a large account with Schwab, and Schwab uses Quicken for mortgages.

Quicken gave me a lot of flack too - so I sat down with my Schwab rep and branch manager -

let them see all my assets, etc - and they interceded with Quicken to get me

exactly what I was looking for. Like you, they could easily see I had the assets to

cover the mortgage many times over.

 

After being with Chase for 26 years I was not happy.

 

BTW - the community bank suggestion seems excellent - you need to have a real business

conversation with decision makers instead of layers of gatekeepers.

 

 

[bookie71]

Have you tried a small local bank or a credit union?  They are much more reasonable then the big guys.

[Fat Pitch]

Eric,

 

I just sent you a PM. I know a lender that does odd ball jumbo loans in Santa Barbara.

[arbcon]

I had the same problem as Eric. I wound up delaying the close of the property past the w/d date of the some of the funds, and just paying cash at closing. I hated giving away the optionality of the higher returns, but curiously, experienced a nice piece of mind once the whole process was complete.

[NoCalledStrikes]

I guess they would rather lend to 55 year olds on 30 yr amortizations... because don't you know, they will work until 85 to pay it off.

 

 

Aware of this phenomena, I did a re-fi last year before retiring :)

 

I've learned over the years not to list all your assets on the refi form, just enough to qualify for the loan.  The mortgage brokers don't seem to care about how much over the minimum you have, but they will have no end of heartburn should you have an asset that they can't explain to the next person down the line in the approval process.

 

[BG2008]

Eric,

 

Trying to refi here as well.  I spoke with a friend who works at Chase and he mentioned a loan product backed by collaterals in brokerage accounts (likely have to open a trading account with them).  The collateral is not the house, the collateral is assets in your brokerage account which could be in cash or highly liquid securities.  The real kicker here is that rate offered, I believe it is something like 3 month libor plus <100 bps.  Don't remember the exact figure, but the cost is less than 2%.  It's not a 30 yr fixed, but at a low enough cost, it may make sense. 

[bookie71]

Big banks do not like self employed people.  I can give you story after story such as the contractor who could borrow 200-300,000 on his signature for his construction firm, but the same bank wouldn't lend him money to improve his free and clear home ( I think the amount was a little less than 100,000 and the home was valued at over 1/2 million.

Often times a local community bank or credit union will actually look at the "character and collateral '" etc of the individual.

I wish you luck

[thelads]

Eric - have you tried the HSBC private bank? I hear they are being reasonably aggressive on loan terms

[ERICOPOLY]

I've been referred (by the Wells Fargo employee) to a friend of his at Manhattan Bank.  We'll see how that goes.

 

Thank you for the numerous helpful suggestions.

 

It's just painful putting up with this kind of bad decision making -- so what if MPIC is illiquid for 90 days?  That problem is so easily solved with common sense.  They could have just asked me to prepay the last three months of loan payments.  Worst case... there is no worst case!  They would already have that money... so the risk is completely mitigated.

[Munger_Disciple]

The collateral is not the house, the collateral is assets in your brokerage account which could be in cash or highly liquid securities.

 

How is this different from a margin loan? If so, it does not make much sense.

[turar]

I've been referred (by the Wells Fargo employee) to a friend of his at Manhattan Bank.  We'll see how that goes.

 

Thank you for the numerous helpful suggestions.

 

It's just painful putting up with this kind of bad decision making -- so what if MPIC is illiquid for 90 days?  That problem is so easily solved with common sense.  They could have just asked me to prepay the last three months of loan payments.  Worst case... there is no worst case!  They would already have that money... so the risk is completely mitigated.

 

Almost sounds easier to get a job, get a loan, and then quit.

[Redskin212]

 

 

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Re: Ask Eric!

 

« Reply #136 on: Today at 02:53:04 PM »

 

 

Quote

 

 

 

 

 

Quote from: ERICOPOLY on Today at 12:29:24 PM

 

 

 

 

Almost sounds easier to get a job, get a loan, and then quit.

 

+1

 

 

[ERICOPOLY]

I guess they would rather lend to 55 year olds on 30 yr amortizations... because don't you know, they will work until 85 to pay it off.

 

 

Aware of this phenomena, I did a re-fi last year before retiring :)

 

 

Does your amortization schedule run out further than your life expectancy?

 

I bet they do that all the time... give people loans that they aren't expected to live long enough to repay.

 

They are expected to stop making payments before the loan is repaid.

 

[crastogi]

Eric,

 

Trying to refi here as well.  I spoke with a friend who works at Chase and he mentioned a loan product backed by collaterals in brokerage accounts (likely have to open a trading account with them).  The collateral is not the house, the collateral is assets in your brokerage account which could be in cash or highly liquid securities.  The real kicker here is that rate offered, I believe it is something like 3 month libor plus <100 bps.  Don't remember the exact figure, but the cost is less than 2%.  It's not a 30 yr fixed, but at a low enough cost, it may make sense.

 

Isn't that how Mark Zuckerburg got his mortgage funded?  I believe some brokerage should give a portfolio margin type loan with enough assets

[Uccmal]

Hi Eric, I deal with a non-bank mortgage broker.  He is essentially self employed.  The umbrella company he works for is a tiny division of GMAC (whatever its called now). 

 

So, here is how it works.  The folks at your local Wf or BAC or whatever dont have access to higher ups.  My broker deals directly with VPs or senior managers of lending.  I get better treatment with the same institutions through him than walking in the front door of a local branch. 

 

Alot of mortgage companies are virtual in that they have no branches, and their rates are usually better than the big banks.  He has access to their more senior people.

 

The following might work.  In Canada, our mortgages are not tax deductible.  People have been known to pay down their mortgage, borrow the money via a Heloc, and invest the money to get a the tax deduction - funds borrowed for investment purposes are tax deductible. 

 

BTW, I am having a good laugh about your predicament.  The absurdity of small minded people and organizations never ceases to amaze me. 

 

 

[ERICOPOLY]

I should have guessed it... the big banks are keeping their powder dry so as to loan to people with "spotty histories" instead.

 

But wait, it gets better... these credits appear shaky enough to qualify for below-market rates:

 

Citigroup Inc. and Bank of America Corp. will provide mortgages at discounted interest rates as part of their efforts to help borrowers with low incomes or subprime-credit histories.

 

Citigroup, the seventh-largest mortgage lender by volume in the U.S., has agreed to fund 15-year fixed-rate mortgages with below-market interest rates for these borrowers.

 

http://online.wsj.com/articles/citigroup-and-bank-of-america-offer-mortgages-with-discounted-rates-1410906909?ru=yahoo?mod=yahoo_itp

 

[ukvalueinvestment]

As a Brit, it amuses me slightly that you are even considering the possibility of securing a house against an equity portfolio.  This is something that is impossible to obtain in Europe, I think, unless you are Ultra High Net Worth and a customer of a top private bank.

 

If I were a bank shareholder, it's not something I would want my company to be doing, given bank's appalling records with anything non vanilla.  And as a citizen, it makes me somewhat uncomfortable, it doesn't sound like something that is particularly good for the stability of the financial system.  While Eric knows what he's doing, I'm sure, the product will be abused by those that don't.

 

All that said, I wish I could get this in the UK :)

[oddballstocks]

As a Brit, it amuses me slightly that you are even considering the possibility of securing a house against an equity portfolio.  This is something that is impossible to obtain in Europe, I think, unless you are Ultra High Net Worth and a customer of a top private bank.

 

If I were a bank shareholder, it's not something I would want my company to be doing, given bank's appalling records with anything non vanilla.  And as a citizen, it makes me somewhat uncomfortable, it doesn't sound like something that is particularly good for the stability of the financial system.  While Eric knows what he's doing, I'm sure, the product will be abused by those that don't.

 

All that said, I wish I could get this in the UK :)

 

There are entire banks in the US who do only this, as an example TriState Capital Bank is one.  It's portfolio lending, they'll lend against equities, against shares in a private business, against cars and jewelry.  Anything you have of value they'll lend against.

[TwoCitiesCapital]

Sorry to hear it Eric. Banks are f**king scum. Pretty sure they just dont do business with people they cant reasonably screw over. I've only ever been happy with USAA but they don't provide a lot of the business/investing options I've previously looked for so my uses for them are limited.

 

I've previously been turned down for a commercial mortgage to buy a building that was leased to a very successful and well located Dollar General. It was on sale for 250k (motivated seller who needed cash). We had 30% down. The DG produced 25k in annual rent, had a revenue sharing option of 2% of sales over 1M which added another 20K at year and had grown every year for last 7, had 5 years left on the lease and were in talks to extend with the current owners.

 

Despite the fact that the 25k was enough to cover all mortgage expenses, and the total 45k would have nearly paid the loan off after 5 years, and that my business partner and I were willing to personally secure the loan against our incomes and up to 50k of our assets at the time, and that we both had credit scores in the high 600s at the time (we were just out of college), we couldn't find a bank who would take it. We probably went to 10 different babks and credit unions.

 

And yet I have friends getting mortgages for 10% down secured by only their income. I just don't f*cking understand banks and I never want to be in a position where I'm reliant on them to get a deal done again. This is why I hoard capital.

[Laxputs]

Hi Eric.

 

I haven't seen it posted in this thread. What does your current portfolio consist of?

 

TIA.

[ERICOPOLY]

Hi Eric.

 

I haven't seen it posted in this thread. What does your current portfolio consist of?

 

TIA.

 

My taxable portfolio consists of BAC stock, portfolio margin, and puts to protect it.  Then there are covered calls to pay for the puts.  There are some JPM puts that I've written.

 

It's basically a tax-efficient BAC bull-spread with some JPM downside.   

 

Wells Fargo said that because there is a margin loan that they value it at zero.  I told them that it's the net exposure that matters, not the gross exposure.  For example, I told them that they have no equity whatsoever in Wells Fargo bank because of the gross derivatives exposure -- they didn't seem to understand the analogy.

[Guest Schwab711]

Mortgages with securities as collateral look/perform awful in stress-testing due to government mandated data used for stress tests. Stress tests have definitely affected what products are given priority and what products are all but abandoned. Not that it matters but before you assume big banks are inflexible you should understand that Dodd-Frank and BASEL III have changed the industry tremendously in the name of lowering tax-payer risk.

[bookie71]

You folks, just don't fit into their check lists.

[meiroy]

I was turned down by Wells Fargo again for a mortgage.

 

They won't lend me a figure amounting to 1/7 of my net worth to secure a home with 30% down payment.  Farkin' Bastages.

 

This time they came up with a more creative excuse...

 

They don't "like" hedge funds (MPIC) and they "frown" on private equity (Dhandho).

 

Interestingly, my investments in MPIC were given a value of ZERO and my investment in Dhandho Holdings was given a value of ZERO.  The reason being is that it is possible that they might have to wait 90 days to redeem the funds from MPIC, and possibly another 11.5 years for Dhandho. 

 

The MPIC funds alone are enough to cover the mortgage, even after a 20% impairment.  Oh... heaven forbid... waiting 90 days.

 

I guess they would rather lend to 55 year olds on 30 yr amortizations... because don't you know, they will work until 85 to pay it off.

 

You know, in Canada, there is a company called Home Capital Group, they offer mortgages to people in your situation, where traditionnal lenders do no want to help you. There are probably some players in that niche in the US too?

 

I thought I'd give traditional lenders one more shot before I'd go to hard money route.  There is a mortgage out there, it's just that the terms are getting worse.

 

What a bunch of jerks though... their big hangup is that MPIC is "illiquid" because of the potential 90 day lockup.  Yet they'll lend to people all day long who might get fired and not find work again for years.

 

And don't they make money if they take the house from me in foreclosure and flip it?  I even offered them 50% down and they still said no.  What the f*** is their problem?

 

And yes, for you Wells Fargo fans, they did try (once again) to get me to move my assets to Wells Fargo in order to qualify me for a loan with their "private bank".  Plus, with all the cash piling up in my checking account (getting ready for the down payment) a branch employee from Los Altos (where I opened the account) called to ask if I'd like to invest in one of their other products that earns more return than my checking account.  So they're working hard at selling me even while being relatively useless at the same time.

 

Their problem is that they might get it pushed back on them. They don't care about the 30 years argument, they sell the loan off anyhow so as long as it's up to the rules than they did just fine.  Blame regulators for slowing the recovery, banks can only operate in that framework.