My loan was originally set up as an 80/20 which means 80% is originated by one bank while the other 20% is from another bank. The 80% was done through a company that has since gone under but before the bankruptcy, my loan was transferred twice, ending up with America’s Servicing Company (Wells Fargo). The ASC loan was a 5 year adjustable rate mortgage (ARM). The risk with an ARM is that without a fixed rate, the bank can raise your monthly payment if the Fed raises their rate. It’s a gamble because with a 5 year ARM you have a lower interest rate than a fixed rate plan for the first 5 years but in the 6th year, the rate goes up (at least that’s what the bank is gambling on). When I decided on a 5 year ARM, I figured after 5 years, I can always refinance if necessary. On January 11th 2010, I got a notice from ASC stating that my interest rate was dropping, resulting in a lower monthly payment. I guess my gamble paid off because my mortgage payment actually dropped. The second mortgage with Chase bank is a 15 year fixed rate resulting in a consistent $241.65 per month. Both mortgages together totaled $780.63 per month including insurance and taxes. Not too bad for a 3-2 single family home worth $175,000.00 (Good luck finding a decent two bedroom apartment for under $800 per month in Austin, TX). In recent years some homeowners have been criticized for being irresponsible because they “bought too much house” and therefore should lose it based on their own bad decision. That’s debatable for anyone but in my case it’s not even a reasonable accusation and here’s why. When things are going well in my line of work, I make about $3200.00 per month, not including rental income which is about $850.00 per month. That means the mortgage was only 26% of the expected income level for my line of work. Before the interest rate started to drop, it was as high as 37% but that’s not factoring in the rental income. (Loan modifications were designed for people whose payments were even higher than that and the goal was to get their payments down in the 30-33% range by lowering the interest rate and even forgiving part of the debt). If you consider my rental income, then the mortgage only got as high as 30% so, I don’t think I can be categorized in the “bought too much house” column. My business plan was real simple; keep renting rooms to boarders until I finished the studio at which point I’d instead rent the studio for a lot more. The demand for “Short Term Rentals” (or STRs) in Austin has risen sharply in recent years, so much so that a few years ago, the City of Austin started issuing permits for homeowners who want to take advantage of the business opportunity. If my house had not been in foreclosure, I could have gotten one of those permits (there is only a limited number available for the various neighborhoods).
When the banking industry started to see a sharp increase in loan defaults, the federal government offered assistance to the public by funding HUD approved housing counseling services (This was part of a “Making Home Affordable” initiative started by the federal government to help homeowners avoid foreclosure). ASC provided me with notices to that fact on a regular basis. I guess the idea was that these counselors would help navigate the foreclosure avoidance process. I was relieved that the federal government was doing something about this problem, so, I signed a power of attorney with one such business called Frameworks CDC. They told me that I should forward my documentation to them and they would be an intermediary. So, I tried to respond to ASC’s RFI on January 12th, 2010 when I sent the requested documents to Frameworks expecting that they would be aware of deadlines and forward them in time. Then on January 25th I received a letter stating that my assistance request was denied because I failed to reply in the timeframe listed in the RFI. (Notice that in the RFI, ASC gives a 10 day deadline from the date of the letter which leaves only 5 days to deliver the response. Since it takes 5 days to get it by mail and then another 5 days to send it back, well that leaves you a whopping 0 days to gather the documents. Of course, you could fax the documents to them, but they include personal information such as social security numbers, loan numbers, IRS information and fax and email transmissions are not encrypted, which means anyone monitoring your computer/fax transmissions can read the contents. Some would argue that worrying about lack of encryption is just paranoid however, I have to disagree since my identity has been stolen 3 times already; twice from government databases and once when a Chase Bank employee emailed my account information to his personal email address). Another consideration when deciding how to send your documents is that, in some cases you need to use certified mail so that you can prove the bank received your response (This becomes important later when you have to file a lawsuit). After I got the notice that ASC had not received my response, I called frameworks and asked my account representative what happened. Turns out she hadn’t sent the documents and didn’t sound very concerned. Nor did she want to accept any blame or level of responsibility to act in a timely manner. So on February 1, I faxed the requested documents to ASC myself which included my hardship letter and income profit/loss statement. Soon after that I cancelled the Frameworks power of attorney and signed up with a different agency but found them not to be any more helpful. Most of the time when I had a question about the foreclosure process, the rep did not know the answer and I didn’t trust their ability or motivation to keep up with the process so, since then, I’ve been doing everything myself. It makes me wonder how much of our tax dollars are going towards paying these counseling services. And, why do we pay them, particularly since they don’t possess any unique industry knowledge that will help you save your home? Maybe if they knew more than the homeowner and handled the paperwork reliably on our behalf it would be worth it but, clearly they don’t see that as their responsibility, so…..what’s the point? Just because you claim that you are there to help, doesn’t mean you are….. Sounds like a waste of tax dollars to me.