Tuesday, June 5, 2007

Losing at Musical Chairs

What a day!!

I was driving most of yesterday - best time I've had working in a long time, BTW - because I had to be in Flint at 9:00 a.m., in Saginaw by 11:00 a.m., and then in Battle Creek by 2:30 p.m. The first couple of legs of the trip weren't too bad; Battle Creek was a bit tricky, but that was because of road construction. All in all, not a bad day.

Plus, of the three hearings I attended yesterday, I won 2 of them. .667 is a pretty decent batting average..... :)

I'm saying this to distract myself from the current debate going on with my mortgage lenders..... When I bought my condo, I bought it with what's called an 80/20 loan, which means that I borrowed 100% of the purchase price. The stupid broker I dealt with told me that the prinicipal mortgage (i.e., first mortgage) would be a fixed rate loan, but the 2nd would be an ARM. I said "fine." Not great, but not really another way to do this.

I did not get the documents until the day of closing because of repeated delays on his part even though I'd told him that I needed to be out of my apartment by July 5. He kept telling me that the deal would be done the way he'd promised. When I got to the closing, I saw that he'd structured it backwards. Instead of having the ARM on the 2nd loan, the first loan was an ARM and the 2nd was a fixed rate mortgage. And, the fixed period was only for 2 years.

Since I'd had to give my notice at my apartment and had packed everything up already, I had no choice - either close as scheduled or be homeless. Knowing what I know now, I wish I'd taken everything to the nearest storage unit and waited, but this was my first purchase. I closed, moved in and went on.

Now that it's almost time for the ARM to adjust for the first adjustment, it's going to go up 3.4% - which means that my payment would jump from $758/month to $1,015/month.

My mortgage company is trying to work things out, but the 2nd mortgage being fixed is kicking everything to pieces. Since they're in a fairly secure position, they don't want to do what is called a subordination (which would put them back at 2nd place on the property) because the property may not be worth what is owed on it. If they subordinate (in the event of default), the first lender would get first crack at the property, including any proceeds. Even if they foreclosed, they would have a property subject to the 1st mortgage, which they wouldn't be able to sell.

So they've decided that if the property isn't worth what is owed on it, they would rather risk getting nothing than to subordinate their position, so they won't subordinate.

Which is to say that, in the game of real estate musical chairs, I might be without a seat.

UPDATE: I found an amendment to mortgage form and sent it to the guy at the 1st mortgage company. Bless his heart, he is going to ship it to his underwriter. Maybe I'll even get a new client out of this deal!! :)

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