Financial Insecurity

A few days ago, like a modern day Bonnie and Clyde, my husband and I walked into a bank and slipped a note across the counter to the teller.

Give me all my money, it read.

The clerk, a girl in her twenties who will compliment me on my wallet during our transaction before she learns with disappointment that it was purchased at a thrift store, barely raised her eyebrows. Instead, with a friendly smile, she turned from us to consult her manager and seek approval on the cashier’s check we had, in actuality, requested.

Like many of our fellow Americans, my husband and I are refinancing our home. We’re “taking advantage of the incredible interest rates" that we've been told won’t be around much longer. After we lock our rate, I watch several news reports noting that the interest rate has indeed “reached an all-time, 30-month high.” Because it is a point above the rate I’ve cleverly secured, these reports make me grin with pleasure.

The current “mortgage crisis” that has triggered “the great recession” seems chock-full of these double entendres, a mastery of language with the soul purpose of reducing meaning so that the rest of us can’t figure out what the hell is really going on.

Maybe it’s because too many talented writers have gone into the marketing industry and credit is now extended to us with dazzling phrases like “Chase Freedom,” which, by the way, is now trademarked.

I can’t help but notice that these same catch-phrases being tossed around today are the very same ones first used on us in 2006, the height of the sub-prime mortgage craze, when my husband and I first set out to purchase our home.

At the time, we had been married for two years and were rapidly outgrowing our small rental. Like everyone else, we wanted to buy a home. Also like everyone else, we had no idea what we were doing.

Despite this fact, everyone seemed to support us from our parents to our friends to our co-workers. Perhaps it was because they all held mortgages and wanted us to join them in their sinking ship. Regardless, there was no shortage of encouraging advice. Rent is like flushing money down the toilet, they said. The housing market is only going to go up, you might as well get in now. You can write the interest off your income taxes.

Even in the supermarket, I remember circling the aisles and hearing the manager on the intercom beaconing us to stop at the branch bank at the front of the store to find out more about the historic interest rate lows.

Only our landlord was sad to hear that we would be leaving our cottage, which we’d completely renovated in trade for a few months of free rent. She even offered us their five bedroom farmhouse that they were having to re-list because a deal to develop the land had been blocked by the town. Yet, we thumbed our nose at the offer in trade for the coveted dream of ownership.

The first mortgage officer we visited was the epitome of the crooked brokers that have been recently cartooned. (It should be noted that his office was located in the Merrill Lynch Building.) He tried to offer us a loan nearly 5 times that of our annual income and, even though our credit scores were well into the 700s, he also claimed that we’d never qualify for a fixed 30-year rate and would have to go with a 7-year ARM for 80% of our loan and the remaining 10% would be a fifteen-year balloon (we had figured out how to get 10% down out of our retirement vehicles, which ended up costing us a bundle in taxes, but that's for another essay).

It is only in retrospect that I am now well-versed enough to understand why exactly he was selling us a load of goods. Fortunately for us, we simply got a bad vibe at his insistence that we should buy a house for much more than we felt we could comfortably afford. (Also, for any of you marketers reading this, I would avoid pairing the word “balloon” with anything having to do with finances. While attractive to young children, it is far too accurate an image of something that will eventually explode.)

When we left his office, it was with a rancid taste in our mouths that has only gotten worse as we’ve watched houses on our block foreclose, and I can only surmise that these losses were because of his loans or from others like him.

I’m going to spare you the details. Our story is not the tragedy that it could have been. We ended up with a decent sized house priced at a little less than 2.5 times our annual salaries and a 30-year fixed rate from a broker who sends us birthday and Christmas cards and who I feel bonded with enough to call a friend though I think he thinks I’m a little weird and all too eager to talk interest rates and amortization tables. Although we’ve watched our house drop in value over the last eighteen months, we are not underwater with our loan (despite the fact that today 24% of residential home owners are.)

So, this time around, I can’t really understand exactly how it is that we are again being offered something for a seeming nothing, a new loan with a lower interest rate. And perhaps, the reason why I feel a bit like a robber standing at the bank asking for my own money to make this transaction.

If anything, anyone who has turned on the news knows that there is no such thing as a free lunch, you can be hurt by what you don’t know, and easy credit is simply too good to be true.

I’ve done the math many times over (there is a great website for amortization calculations if you’d like to do your own ) and the bank is loosing money on this deal (and pressumably the millions of others like it).

Even with $4,000 in incentives for servicers backed by the government’s HASP program (which I can count as coming out of this taxpayer’s pocket), I’m not a borrower anywhere near default. I suppose they risk losing me to another bank that will beat their price and there is a miniscule amount they collect in service fees (which I immediately recoup because my first payment on my new mortgage isn’t due for 60 days.) Even though it will take me four more years to pay off this loan if I make every scheduled payment as I’m starting over at 30 years, at the end of the day what I pay will be lower than staying in my current loan.

As of the end of January, 1.3 million borrowers were taking advantage of loan modifications available through HASP, the Homeowners Affordability and Sustainability Program (yet another ACONYM that is supposed to suggest "free money"). This doesn’t include countless borrowers like me who just want to refinance to follow the trends on the 30-year bond.

With the dominant narrative circulating -- the Wall Street bankers armed with their clever language and incompetent ratings agencies that made sub-prime deals sound like a song (even the term sub-prime seems to suggest you are getting a better deal that is lower than prime even when it is actually far above) -- I am eager to be seemingly on the “right,” money-saving side of this transaction. Yet, I think it’s all too Pollyanna to believe that the banks (and the bankers who’ve all continued to make millions thanks to the fact that their companies are publicly held and therefore all the risk is assumed by their stockholders) are actually taking a hit.

Perhaps it should be noted that HASP only applies to the safest, most likely to repay their debts homeowners, those whose loans are gaurenteed by Uncle Sam's cousin's Fannie Mae and Freddie Mac and not the borrowers who were sold these complicated language and reality defying products that opened up the doors to this whole mess. Maybe that is a piece of the grand irony here. We are using our tax dollars to sure up loans that would in all likelihood be repaid. We're making the safest of bets and everyone seems happy about it.

As we walk out of the bank, my husband and I feel light and airy. We joke to each other about the soreness in our wrists from signing the pile of mortgage papers and wonder if anyone has ever made a successful personal injury claim. Yet, somehow I can’t escape the feeling that the alarm has indeed been triggered. It’s just that we can’t hear it yet.