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A Mortgage Race With No Finish Line

July 15, 2008 1:11 PM

We're hearing horror stories these days about how tough it is to get a mortgage. During the 'bad old days' (or 'good old days,' depending on your perspective) a couple of years ago, brokers joked that if you could fog a mirror you could get a mortgage. Not anymore, as this post from Nightline producer Roxanna Sherwood (pictured here) illustrates:

"E-mail me or call me so we can discuss the next step," wrote my lawyer this morning, one of hundreds of e-mails we have exchanged in the seven months since I've been in contract for a co-op purchase in Brooklyn. Pushing my real work to the side, I called him for the some hundredth time in the past half a year.

"I really really want to get this done," he bemoaned, offering to drive to my house tomorrow morning to have me sign some papers. "You have to decide who you are going to go with." I have three mortgage brokers that all are at the point of collision in this obscene home purchasing process and I am going to need to cut all but one of them loose.

All I have done for months is sign papers that seem to disappear into the ether, never amounting to anything tangible. Empty words from brokers have cycled through my days for far too long. Help. Help. I want my sense of humor back. It's been months since I've felt like laughing. I have until next Wednesday to close on the modest one-bedroom apartment I agreed to buy for $230,000 on December 4th of last year. Next week, I stand to lose the $23,000 I put down on it. If I could back out of the deal, I would, but it's too late now. I am in a battle for my hard-earned money.

As I envision the one-bedroom apartment in Brooklyn's Kensington, I want to throw up. It's a place I've seen only once. Could it really be worth everything I've been through? I am overwhelmed with the desire to vandalize it. I loathe it. I loathe even the thought of it. When I saw the distinct pretty little pre-war place on an adequate block (the old pre-war building stands next to an Autozone...hmm), I thought I was on to something wonderful. If you are sensing contradictions, you are glimpsing my internal conflict.

It all seemed rosy back in December. Looking to buy my first home, I was on the brink of becoming a real adult, I thought, and about to launch a responsible fiscal future. It was an open house in the snow. The broker said she was worried no one would come. A man and woman there quickly left, shaking their heads and muttering about it being too small, but I knew instantly that this was the right place and not small at all. I had been renting a similar one-bedroom apartment for seven years in a similar pre-war co-op building just up the street. The price tag on that co-op: $450,000. In 2001, I could have bought it for $175,000, but that seemed outrageous at the time. I carried on renting instead. Talk about kicking myself. Coming to terms with having been priced out was difficult, but finally I decided to accept the truth, grow-up and go for something affordable. The old apartment was on Prospect Park, the Brooklyn version of Central Park. So leaving a "park block" was a tough compromise, but it seemed to make sense. After all, I would own this place. Life would be better as an owner, I thought. I offered $5,000 less than the asking price and my offer was accepted.

At the time, it seemed mortgages were being given out like candy. I had a pulse, I could tie my shoelaces. I'd even been in the same job forever. I was already pre-approved for 90 percent financing. Certainly I could get a mortgage! Though my credit report came back with several unseemly items: a few late payments, too many credit cards, a questionable income-to-debt ratio, my broker assured me none of this would be a problem. My credit score had dropped a hundred points since the last time I had my credit pulled, leaving me in the middle-600s, which at this point was considered mediocre. My broker reassured me that this was no problem at all and he'd be able to steer us smoothly to a closing in late-February after co-op board approval. Now, trying to get approved by a co-op board is a whole other topic and source of great angst as all my dirty laundry would be carefully dissected by strangers. It was the part of the process that could be the wrench in this picture. Looking back now, if I had been rejected by the board, I'd have my down payment back. I'd again have the promise of my life as it was before this maddening upheaval.

Things did seem to move smoothly at first. I sent my broker a bunch of documents and I was approved. There was a successful appraisal. The co-op board approval came in late March. Okay. That anxiety-ridden week ended on a note of elation. I might even close the following week, according to my broker. Then, suddenly, things started to teeter. First, the bank that approved me folded. My broker reassured me that he had seen it coming and had automatically re-submitted my package to another bank, so we were indeed still on target. All the paperwork I'd given him was transferred to the new bank: my past couple of years of W-2s, recent pay stubs, assets, two forms of government-issued IDs, etc. Washington Mutual, one of the biggest and most secure lending banks for mortgages, would even accept the appraisal that was on file. It all seemed easy enough.

Next, I get a call from my broker that in order to do the deal, I'd need to come up with an additional 10 percent down. Now, the broker says banks were getting tougher and wanted 20 percent down. I scramble to come up with an extra $23k. Another point at which the deal should have derailed—after all, it's not easy coming up with over twenty thousand dollars at the drop of a dime – especially when it's borrowed. The bank wants proof the money is in my account. The paperwork is submitted and now they need 48 to 72 hours to underwrite. Once that's done, I would be "clear to close" according to my optimistic broker.

I wait. After three days, no clear. Instead, I am told that I need to provide more recent pay stubs because the ones in the file were old. Done. Another three days of underwriting pass. Then it is a new W-2 they want since 2007 is now over. Another three days. No clear. Then, it's updated bank statements. Three days. An updated 401k statement. Three days. This goes on for weeks....weeks of faxing, waiting, calling and angst-ing. At this point, part of my current apartment is already boxed up in anticipation of the closing that never comes. I even succeed at boosting my credit rating by getting an inaccurate delinquency removed, but still...no clear to close.

By early May, the bank stops requesting more documentation, but still no clear to close. My lawyer tells me that I am completely approved under their terms, but now they are giving the building a hard time, requesting additional documentation and scrutinizing every detail. My lawyer starts saying things like: "they've never requested this kind of paperwork before'" and "this is new to me." He's handled New York City co-op deals before, so I tell myself it couldn't be inexperience. It's just the climate of course. The banks are changing. They're stricter now and I'm entangled in the crosshairs of this changing picture. We wait.

It's late May when I head abroad on assignment for a few days. My lawyer tells me that we'd probably close just as soon as I return later that week. So, I go at the risk of being unavailable to provide any last minute financial documents that might be needed. It's an ironic image: me lying in my boutique hotel bed in Cannes, France, contemplating the apartment that's now fallen from its glossy image to a dump in an "up and coming" neighborhood. How much do I really want this place anyway? The question begins to percolate, but I push it away 'cause it's too late.

Back from France, there are no messages from my broker or my attorney. I know what that means. More bad news, more faxing, more phone calls.... I call my attorney. I don't even have to say my name any more. And he knows why I am calling. In my absence, the demands for documentation from the building management became even more interesting. "Well," my attorney says, "they needed a proposed amendment." A what? "And the last one the building has on file is from 1983," he says, "but there's a legitimate and legal reason for it and they can prove it." All that was needed was a letter from New York's Attorney General?!? Unbelievable. "Don't worry," he tells me. He's already gotten the letter and it's in the file. Three more days to underwrite. We wait.

After 72 hours the bank comes back with a "Now, just to finalize everything..." And I need to submit all updated paperwork again because so much time has passed and everything I submitted is dated. Begrudgingly, I do it right away but snip at my broker out of bitterness. As we wait another three days, my attorney tells me that the seller's attorney, who has been oh-so-patient all this time (acutely aware of how difficult things are in the market), is now getting impatient and demanding a closing... or else. A "Time is of the Essence" letter has been safely averted until this point. The seller is now not so sure this deal will ever go through. Either am I. Taking matters into my hands, I start talking to the bank representative myself. First she's encouraging. Then she stops returning calls.

Following my lawyer's advice, I reach out to another real estate broker who comes highly recommended by a close family friend. He'll take care of me, I am told. I explain to him, blow by blow, every bit of this crazy process that I've navigated so far. He says if I don't close immediately with Washington Mutual, I'll never close with them. He's gotten an inside tip that WaMu would be getting out of the business of doing mortgages with brokers by June 12th. "I guarantee that if you haven't closed by June 12th, you absolutely will not close." He thinks he can help me and he sounds like he knows what he's talking about, so now I start the process with this Broker #2. At this point, I should mention that I haven't heard from Broker #1 in a while. His empty promises have made our conversations contentious at best, so I assume he's avoiding me. I leave him hanging as I pursue an ever-elusive closing with someone else.

At first, I am feeling like I am finally getting somewhere real. Broker #2 comes back at me with solid advice, attending to my every call and question, offering encouraging guidance and enlightening tidbits, starting with the tip about WaMu which at this point I am still not sure is true. After just two days, this broker calls me with good news. I am tentatively approved at Ridgewood Savings Bank. I submit all my paperwork anew and all I need to do now is get a questionnaire from the building management (at a fee of $50), so that an appraisal can be set up. I get this done right away. He then tells me that after reviewing the package so far, the bank will honor a lower interest rate on the loan if I open a bank account with them, one from which they'd automatically deduct my monthly payment to them. Oh – wait – not monthly any more -- they want a bi-weekly payment. Okay. It's a crisis; I still have to realize that. And because of that I also must accept that the interest rate they are offering is over 6 percent, up from a little over 5 percent that had been quoted me on the other deal months before. Whatever. I have to accept this.

June 12th rolls around, and lo and behold, my lawyer calls me that afternoon to tell me that WaMu has thrown out the loan after weeks of back and forth. Instead of feeling deflated, I am almost empowered because I finally feel like I am officially in good hands with Broker #2. This guy knows what he's talking about.

Ha! Not so fast. The new broker calls to say that it appears that the co-op will not appraise at the value that I have agreed to pay for it. This means I'd have to come up with the difference in payment (this on top of that additional ten percent I've agreed to put down)! This is a huge blow. I am hemorrhaging money. Broker #2 says he'll keep working at it – don't give up hope.

Out of the blue, Broker #1 finally calls. We haven't spoken since the WaMu deal folded -- he didn't even have the nerve to call and tell me. Now, he says he can still get this done...somewhere else. I am angrily candid with him about having moved on weeks ago and cannot understand why someone in his position would not have known what Broker #2 knew about WaMu. He apologizes and dangles fresh hope (I guess that's what it is): he has two banks interested. I'll believe it when I see it.

It is June 23rd when the "Time is of the Essence" bomb drops. I have to close in 30 days from that date -- or else. It'll be a scramble to finish, but in some ways I'm sanguine about it. There's an end in sight. Wherever the madness ends will be a relief. If I lose my money and don't end up a homeowner, I can still finally move on from this debacle. I may not laugh again for a while after losing so much money, but maybe I can salvage a small amount of enjoyment of summer.

The daydreaming is interrupted with a call from the good broker, Broker #2. Before we could square away the appraisal dilemma, Ridgewood Savings Bank backs out of the loan because it rejected the co-op! They cite the building's inflated mortgage, light assets and a shoe-string budget. What am I buying?? I can't dwell on that right now. I am in the mode of trying to save the money I've already spent. Broker #2 says he'll go full speed ahead to find another bank. I'm feeling like a convict (or at least an ex-con), but somehow my self-esteem has not yet been totally drained.

The seller's agent is dumbfounded to learn that the Ridgewood deal has fallen apart. She calls me to offer yet another road: enter Broker #3. I don't know if he's good or bad, only that she's telling me this is the man who can get the job done. Back I go to the fax machine -- new paperwork, new Truth-in-Lending disclosures, new good faith estimates, et cetera, et cetera, et cetera. I'll sign just about anything now to extract this tumor called a mortgage from my life. It's now three brokers in a race that they don't realize they are competing in. Whoever closes first wins.

Broker #1, meanwhile, calls to say that everything is on track with a new bank, Flagstar, and that they have everything they need BUT, unfortunately, because the appraisal on file is so old, it cannot be recertified so I will now need a new appraisal. Fine. Another questionnaire about the building particulars for another $50 and another appraisal for $350. Whatever. That appraisal is completed and goes well. The paperwork is filed and we wait. Maybe they will give me a clear to close this week. Who knows?

Broker #2 is still going the distance -- he gets a new approval, this time with a bank called NCB. They want a fee upfront. They won't give me anything under an 8 percent interest rate. I am getting calls from the NCB-approved appraiser, who, Broker #2 tells me, has dealt with this very building before and a year ago appraised the very unit I am trying to buy. He wants $300 for the appraisal. The signs look good that it will come in at the value I need it to. Chances are good that I won't have to come up with an additional some-thousands of dollars of the difference at the closing. I have not yet returned that appraiser's calls, because...

Broker #3 calls. He has me approved with Citibank, also for a 30-year fixed mortgage, but they will do 90 percent financing, not 80 percent like the other two. I pay a new appraisal fee and that appraisal goes well. The property appraises at $10,000 more than the $230,000 I need it to. Could this actually be good news? Maybe I will after all be able to return the money I've borrowed to account for the additional down payment I‘ve anticipated putting down at the closing. Maybe. If you are still following, though I imagine you must be as confused as I am in all of this, one small stroke of sunshine happened on the eve of the Fannie and Freddie fiasco last week. I locked in a rate of 6.75 percent through Broker #3! Could this be true? A relatively decent interest rate (considering) with a 90 percent financed loan? After everything I've been through? As of today, Citibank is underwriting and I am told by #3 that maybe, possibly, potentially, probably, I will get a clear to close as early as this afternoon. Clear to close. Clear to close. I'll believe that when I see it. What a joke. A closing? I am not sure I should be trusted with a pen right now. I could hurt someone with it in there.

I am afraid to bet on any of these brokers. I can't trust anyone. I think #2 is suspicious that I am stalling him on purpose (I am, but I tell myself it's only business). Instead of calling me himself, he had his assistant call me to check on the status of the paperwork I am supposed to send him to move forward with NCB. I am trying to avoid a fourth appraisal. #1 told me yesterday that Flagstar should deliver a "clear to close" by midweek. We'll see. I am now hanging what feeble hopes are left on #3 and Citibank. I am scared to let any of these guys off the hook, but I must choose.

Did I mention that at some point in this process -- back when I was young a few months ago and truly believed that I'd be signing the papers and taking possession of the co-op in just a few days -- did I mention that I gave up the lovely apartment on the park and put my furniture in storage? Sorry! I did.

The question that I can't let myself focus on: Am I buying an apartment or a lemon? Back when I was really young in late November, standing over Vicki Mabrey's computer looking at the sunny images of the apartment with windows in every room, we both thought it looked like a great deal. I hope I will be restored to that innocence, and maybe my overwhelming desire to sell the place before I even move in will eventually subside. All I want to do now is wreck the place...get in there and graffiti its walls. I try to tell myself that maybe once I own it, this rage will subside. Maybe, just maybe, those sunny images of my future in this apartment will return and maybe just maybe I will cheerfully go about the kitchen and bathroom renovations I had fancied doing so many long months ago. Maybe. If there's any money left.

July 15, 2008 | Permalink | User Comments (15)

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