Friday, October 19, 2007

Anatomy of a mortgage meltdown.

Readers..I don't know how I get myself into these things. But do you really care, really? It makes me have somewhat interesting stories.

So - my real estate friend calls me last night around 6pm, and tells me she thinks finally found me a house. You see, she and I had already viewed a house earlier in the day which I deemed "too nice". I told you.. I'm enamored by houses that people have neglected. Mr S. and I rush to look at the house.

This house happens to be right in front of my friends house. She thought it was going to be sold at auction, but after some poking around found it was going to be stuck into the real estate database and sold on the open market. But it hasn't yet.

This is the his-story of the house as I know it. It was owned by a couple. The wife had MS, and I guess had recently passed away. The husband soon followed. As is pretty common with couples who have been together a long time.

Several months back my friend told me that her neighbor had died. So the house has apparently been in limbo for about that long.

I guess recently, the family came and raided the house. Taking everything that wasn't nailed down. Leaving all the trash of course.

But, this is the kicker. The house was actually paid off.. but it had a small second mortgage on it. The second was minuscule compared to the appraised value of he house. Even in this market. I can only guess the Podunk family couldn't scrape together enough money to pay the second. So they defaulted on the house, and the bank repossessed it.

This is where I come in. This morning we decided to put in a bid on the house.

Later I get a call from my friend telling me this house was owned by Countrywide. I'm sure you've heard of them. They've been on the news for months.

I'm immediately in "aw crap" mode. I don't want to get involved in a Countrywide mess. I've heard the company is in panic mode.. and I'm just not into that. Even though my mortgage company pre-approved me this morning, my friend tells me that Countrywide will also have to pre-approve me.

I'm not really thrilled at having my credit run twice in one day.. but I decide to go through the process. I call the main Countrywide number I was given. Where I'm told "if you are pre-approved, what do you want from us"? They were very nice.. but they just didn't know how to help me.

I call my friend - who finds out I apparently need to call the local branch. So, I do.

Only to find out via recorded message the branch has been closed down. The recorded message refers people to another branch. Which I call. This branch doesn't know how to help me either. This was just an operations site.

So - I call my friend and tell her I give up, I'm not calling anymore numbers. She did eventually find the correct number.. but .. wow. This company is in some serious trouble.


  1. Yeah Countrywide is pretty much toast. If the mortgages don't get them, then the insider trading charges will. You wouldn't be at risk to borrow from them, but I'd still consider myself lucky and use the extra time to reconsider.

    The housing market is going to get a whole lot worse and even another interest rate cut might not save it. Fed fund futures are pointing to a 100% chance for a rate cut in Nov and people are still freaking out.

    Cash will be king after the meltdown, but this could end up taking two years. It would be one thing to be paying high prices when rates are up, but when rates are this low, there is very little room left for the price of a house to appreciate. It's one thing to go from $200k - $400K, but quite another to keep doubling. Without the screwy interest only loans, there just isn't enough income to absorb the higher rates. The SEC gave a really good speech on the entire situation today. In it, they compared the our current status to the book, "if you give a mouse a cookie." It's a little long, but informative.
    My advice is to cash out of the bay area and buy a $100K mansion in the middle of nowhere (with broadband of course.) You could even think about becoming neighbors with Mr. S' mom, I have a feeling that she would be very supportive of the idea ;)

  2. This kind of information makes me very happy that Sarge and I did not get caught up in the whole buy a house thing when all his co-workers were. We are perfectly happy to live in base provded housing. And who knows when we're slated to move, it could be in the next 6 months, it could be the next 6 years (Gads, I hope not!). Sure there's a downside. We're in our mid 30's, and have never owned anything more expensive than a car. But on the up side, Sarge is less than 5 minutes away from work, Piko is 5 minutes away from the school, and the lack of mortgage allows me to indulge in my fabric obsession and maintain my lazy ass housewife lifestyle. MWAHAHAHA!!

    All kidding aside, I would hate to be in the shoes of one of Sarge's "friend". He had his house on the market in November, moved in March, and finally sold it in August. That's 6 months he had to cover that payment when he wasn't even living there!! He thought it was no big deal, but that's a lot of freaking money!!