Your Mortgage File

A Drive Called Spartan

A Drive Called Spartan

I share information on this blog to create awareness around the mortgage process.  It’s mostly technical.

I feel compelled to write about another aspect of home ownership — neighbors.

The storm that hit the Black Hills of South Dakota on October 4th, 2013  caught everyone off guard, even mother nature.  Heavy fall snow fell early that night.  I slipped off to bed expecting to wake up with 10 to 14 inches.

Instead, I woke at 4 a.m. to deafening silence. Our fan was off.  No lights, no heat.  The electricity was out.

I gazed through the window at a blizzard of white snow.  Even this early, with sunlight hours away, one could see as though there were a full moon.  I felt it would be worse than predicted.

Hours later we stepped outside.

It sounded like open hunting as limbs cracked and popped under the load.   The street became a meeting area as neighbors gathered to survey the situation.

Every few minutes we’d say, “There goes another one.”

The trees, still full of leaves, had boughs bent low.  They hung ominously over roofs, cars, and power lines. It was only a matter of time before electricity ceased for over 25,000 people.

The snow grew deeper into the evening and the temperature dropped — heat became a worry. We sat in the car, my wife and two girls, warming up and charging the cell phones. We called parents and discussed options but the last thing we wanted to do was venture into the blizzard.  We concluded it was time to light some candles, gather blankets and huddle together for the evening.

That’s when our neighbor’s son, who on a visit, marched across the snow and banged on our door.

“Let’s go,” he said. “You’re staying with us tonight.  We have a natural gas fireplace and stove. We have heat.”

I am a proud, independent spirit. But this was no the time for bravery, especially with two small girls.

“Ok,” I said.

“Seriously. You need to come.”

So, we hauled our stuff through the two feet of snow to a warm house and even warmer people.  Their hospitality was storybook. They cooked us a warm meal and engaged us in conversation until we felt as though they were family.

We slept soundly and unconcerned. Let it snow.

And snow it did. Yet another foot and a half.

The following morning it stopped and the work began.  The neighborhood, half still without power, once again met in the street.

There were shovels and snowblowers, adults and children, and a whole lot of child laughter. We had over forty inches of wet, heavy snow to move.

After five hours we had cleared ten driveways. Our motivation: Broncos vs. Cowboys.

The guy on the corner owned a pizza shop that never lost power. With the roads partially clear, he slipped down and baked some pizza.

With the work done we congregated, 20 people strong, into one house where the real warmth radiated from the souls of the people who banded together in a time of need.  How proud I was at that moment to be part of a neighborhood that cared for each other, that offered what service they had for the benefit of those in need.   That was, and is, a drive called Spartan.

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Income, Your Mortgage File

Income, Stable and Dependable

Quality-Risk-ManagementRecently, I had a situation where a young borrower applied for a mortgage. Less than a month ago she started a new job but before that she had less than one year of work history. She had good credit but it was recent due to her young age. The underwriter came to me, unsettled.

Why?

In our industry, underwriters are taught to determine if the income is stable and dependable. After all, if you were going to lend your own funds, wouldn’t you want to determine if that person could pay you back?

There is little guarantee when it comes to income. You can be fired, quit or be laid off in a heartbeat.

So, to give us some insight, we look at the history of employment and income. We typically go back two years.  If the borrower hops from job to job, it might be a sign of instability. But, we won’t give up, and we will dig deeper by looking at the borrower profession, and their historical wages. Some jobs are seasonal, and others require people to drift from one employer to another and we won’t penalize someone for this.  Instead, we’ll look back at several years of wages to see what they have historically earned. We will base our decision instead on the continuity of income.

In the above example, does our borrower have a job history worthy of dependability?  If no, then has she demonstrated a continuity of income?  If no, then my underwriter has a right to feel unsettled.  

What if our borrower decides she dislikes her new job and quits?

What if her employer lets her go because she can’t cut the mustard?

What if she has to take a job of lesser pay?

There are all sorts of questions we ask when it comes to income. I realize history can mean little in the way of the future but it’s the only way we can see how that individual handles responsibility. And handling a mortgage is a large responsibility.  So, don’t be discouraged if an underwriter determines your income is not stable or dependable and instead, use it as a learning experience to better your situation. You will be better for it.

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Mortgage Philosophy, Your Mortgage File

Bank or Borrower . . . . or?

Our economy continues to stumble through a storm of uncertainty and hesitation, unable to take a confident step in any direction. We can trace the tailings back to the mortgage crisis which began a crescendo in 2008, climaxed in 2010, and now, what we hope is the diminuendo going into 2014.  I’ve been in the industry for over ten years and I’ve watched and read as the media attempted to find a scapegoat. Since personal accountability flew out the window years ago, let’s blame the cold, heartless banks, right?  After all, they were just in it for the buck and obviously willing to screw the poor, unfortunate American out of a home.

Really? You think a bank wants a foreclosure? Do you know how much that costs them?! Check it out here.

So while the borrower is busy blaming the bank, and the bank is busy dealing with the hemorrhaging associated with the foreclosure trauma, the real culprit is busy baking up that red herring they love so much.

In this NY Times article we get a glimpse into the events that started it all. In 1999, the Clinton administration pressured Fannie Mae and Freddie Mac to loosen the belt on lending in an effort to accommodate minorities and low income consumers. This idea –regardless of best intentions– had unintended consequence and the reality was far opposite the plan

The payment for this government debacle will cost our country billions, if not trillions in the long term. Since no one feels responsible we have been shrugging off the financial burden of this catastrophe in every way imaginable: TARP, Government MBS Program, no budget, etc. The bill is due, and if we fail as a country to handle it as adults, it will be handled for us.  The latter, as I’ve discovered in my life, is not as pleasant as when you willfully resolve the problem yourself.

Good luck, America.

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