I Lost It Today - Warning! Long post (er, rant)

[Zoomie]

Things change.

 

[haha]

Completely sympathetic to your position. Mortgages have never been underwritten against assets but rather against income streams the way banks approach it.

One of the reasons why Ric Edelman makes the argument that having a mortgage plus assets is better than just being debt free with less assets.

What if your dividends and interest are plenty to qualify you? Are you still not a good mortgage candidate in their eyes? It seems to me that realistically, one in this position is more secure than almost anyone other than a law partner, or doctor or nurse, or other professional in his/her own practice. Awfully easy to get laid off from many jobs today.

Ha

 

[Nords]

Completely sympathetic to your position. Mortgages have never been underwritten against assets but rather against income streams the way banks approach it.

I don't know about that-- several years ago Fidelity was offering home mortgages against brokerage assets.

The business plan eventually crumpled under confusion over securred loans and margin calls. Fidelity was probably bombarded with new (tiny) accounts and mortgage applications from "marginal" borrowers.

We've refinanced several mortgages in ER and lack of income has never been an issue until this latest refi. Before when we'd get asked "Why don't you just pay cash?", we'd answer "We think we can do better in the stock market", they'd just nod their heads and collect their closing fees. Everybody was happy until the CDO merry-go-round screeched to a halt. This last time we were told "Oh, your brokerage account could vaporize overnight; we won't loan against assets." Our history of dividend income was barely enough to swing the application but after that "vaporize" comment I certainly wasn't going to discuss our heavy allocation to "dividend-paying" financial stocks...

 

[ERD50]

I don't know about that-- several years ago Fidelity was offering home mortgages against brokerage assets.

I think part of the issue in this case is that those funds are in IRAs, which I think are protected from a mortgage holder. If that's the case, those funds really don't mean anything to the bank, except to the extent that they would "trust" you to use them to pay the mortgage off if it came to that.

This last time we were told "Oh, your brokerage account could vaporize overnight; we won't loan against assets."

edit/add Heh, heh, heh... you could offer to invest the money in the stock of the company that services the annuities the bank sells. I mean, they are pretty much guaranteeing that those companies will be solvent 50 years from now, so that should be fine, right

-ERD50

 

[Animorph]

I'm just about to close on a refi, I hope. They had no interest at all in my portfolio, just W2's and 1040's. They never documented investment accounts. Thank goodness DW still works! We were able to meet income requirements. Seemed pretty low on the appraisal though, which was somewhat of a problem.

 

[calmloki]

Banks is funny. Back in 2001 we were buying an apartment building and had to show every scrap of asset we could find - they wanted not just our tax returns, but rent rolls and copies of all the rental contracts. My gal's job, even though a very small portion of our income, was given great weight in the bank's deliberations. Cash and gold Philharmonics were treated like unicorn horns - lovely to hear about, but nonexistent twaddle. Not good, since i like to have a substantial amount of cash on hand (sure, it's dumb, but little pleasures....). Had no desire to put a slug of cash in the bank - though legally earned and saved and taxed it still looks funny, and dang it - it's our money and we should be able to do what we want with it! No desire to explain my Scrooge MacDuck peccadilloes to the IRS.
After some weeks of hassling back & forth i did a printout of the morning's offering price from a local precious metals dealer - Gold Coins and Bullion Dealer - American Gold Eagle, Canadian Maple Leaf, Panda and Krugerrand Gold Coins - and drove down to the bank's commercial loan officer's branch. Didn't ask if i could see him, just went up the stairs & spotted him behind his glass office walls and didn't give him a chance to escape - trapped him as he tried to scoot out. Put the printout in his hand and pointed out the offering price. He made some small noises about how he wouldn't know if a coin was gold, but putting a coin or two in his hand convinced him that yes, he probably could tell something was gold. I then stacked our coins on his desk for him to count and pulled cash from various pockets and forced him to watch me count the piles - him demurring all the while.
We did get the loan, and it gave me great pleasure to pay the maximum right up to the penalty point each year for three years and then pay it off.

Good times, good times....

 

[NW-Bound]

... This last time we were told "Oh, your brokerage account could vaporize overnight; we won't loan against assets." Our history of dividend income was barely enough to swing the application but after that "vaporize" comment I certainly wasn't going to discuss our heavy allocation to "dividend-paying" financial stocks...

Heh, heh, heh. These bankers are getting wised up, aren't they?

Shoot. Without a job, I guess I will have to pay cash for everything from now on, including houses. If we ever move, will have to sell the house first, put furniture in storage and move to an RV for a while before getting another house.

Arghh... Too much hassle... I'll just wait to die in my house and ask Janet to change my screen-name to accept defeat that I will not be going to the Puget Sound after all.

 

[haha]

Heh, heh, heh. These bankers are getting wised up, aren't they?

Shoot. Without a job, I guess I will have to pay cash for everything from now on, including houses. If we ever move, will have to sell the house first, put furniture in storage and move to an RV for a while before getting another house.

Arghh... Too much hassle... I'll just wait to die in my house and ask Janet to change my screen-name to accept defeat that I will not be going to the Puget Sound after all.

I went down to Lakeview Cemetary yesterday to see Bruce Lee. Walking back down the hill I happened to notice a nice plot for sale. I could get it for you cheap. Totally upscale spot, highest class neighbors like Bruce and Brandon, and Chief Sealth's daughter Princess Angevine, and Seattle pioneers like Henry Yesler and Doc Maynard.

Even the living neighbors are very high class. With the Lake view and in-city location I think a $4,000,000 house would be an inexpensive one, and they go up from there.

But you might have to act fast, all that is left are infill lots, and not many of them.

Ha

 

[NW-Bound]

Thanks, Ha, but I have to pass. The would-be neighbors you mentioned were too classy for a peasant like me.

I would simply request that my ash be spread out on the land of my 2nd home up in the AZ high country. The juniper trees can use some potassium and phosphorus.

 

[Koolau]

Update - update - update - update

Found another banker who is (hopefully) a bit more creative. While they have virtually identical requirements to look at income rather than assets, they are creative in how I might show income. This is absolutely bizarre in my opinion. On my last few tax returns, I have "income" from converting trad. IRAs to Roths. Viola! INCOME! (It's the income, stupid!) AND, it wouldn't have mattered whether I had burned the cash or moved it to another asset (which is what I did)!

In what alternate universe would it make sense that (apparently) using your assets to live on translates to a favorable impression by a bank? If it were me, I'd count it AGAINST a client who had to take money from assets - not the other way around. Oh, well. It was this sort of reasoning that got us into the current mess, I suppose. Nice to know some things never change, eh?

Well, keeping our fingers crossed, we did formally apply for a 25% down mortgage. We'll see what the underwriters say, but the banker was pretty confident that we would get approval - assuming good appraisal, etc.

Thanks to all for your suggestions and encouragement. Nice to know the depth of experience and insight that exists on this forum. Wish us luck!

 

[ERD50]

... This is absolutely bizarre in my opinion. On my last few tax returns, I have "income" from converting trad. IRAs to Roths. Viola! INCOME! (It's the income, stupid!) AND, it wouldn't have mattered whether I had burned the cash or moved it to another asset (which is what I did)!

In what alternate universe would it make sense that (apparently) using your assets to live on translates to a favorable impression by a bank? If it were me, I'd count it AGAINST a client who had to take money from assets - not the other way around. Oh, well. It was this sort of reasoning that got us into the current mess, I suppose. Nice to know some things never change, eh?

And unless banks like that are allowed to fail, they never will change. No reason to.

The more bailouts we have, the worse this is gonna get.


-ERD50

 

[FUEGO]

Found another banker who is (hopefully) a bit more creative. While they have virtually identical requirements to look at income rather than assets, they are creative in how I might show income. This is absolutely bizarre in my opinion. On my last few tax returns, I have "income" from converting trad. IRAs to Roths. Viola! INCOME! (It's the income, stupid!) AND, it wouldn't have mattered whether I had burned the cash or moved it to another asset (which is what I did)!

In what alternate universe would it make sense that (apparently) using your assets to live on translates to a favorable impression by a bank? If it were me, I'd count it AGAINST a client who had to take money from assets - not the other way around. Oh, well. It was this sort of reasoning that got us into the current mess, I suppose. Nice to know some things never change, eh?

It might be the bank or other institution buying their loan that has underwriting requirements such that this type of income reported on a tax form counts as income as long as it is steady (ie multiple years on your tax forms).

 

[thefinancebuff]

It's a two-way street. You asked for a loan. They are not obligated to give it to you. If you didn't need the loan, you wouldn't have asked for it in the first place. So just find another place that will give you the loan or pay cash.

 

[clifp]

And unless banks like that are allowed to fail, they never will change. No reason to.

The more bailouts we have, the worse this is gonna get.


-ERD50

We've had 36 bank failure so far this year. Just none of the too big to fail group.

I admire the creativity of the bank officer in including Roth conversions as income or did he just look at your tax returns and say "ah income".

What impact did have assets several times greater than house have?

 

[armor99]

This is one of the clearest examples I have seen yet as to what happens when govt regulation gets involved, and a "one size fits all" approach is taken to finance.

Obviously since you are not going to have to work till you die like most people will, it automatically puts you in a minority class of people. At least as far as the bank is concerned. They have little formulas, and regulations, and govt guidlines now that they have to follow. They follow these "rules" because it has been determined (by the govt) that for 90% of the population, following these rules will be a "good" thing. It is being done for your "protection". Presumably protection from yourself.

But what happens to you when you do not fit into this mold? When you want to think outside the box for yourself, like retiring early? The bank does not know how to classify you, and is so bound up in the govt imperative to "not hurt anyone" (no bank now wants that "predatory lender" label), that they would rather take a pass on your obviously good investment, than have you NOT fit their neat little equations.

In short... the banks are no longer thinking into what is in their "best interests". They are being strong-armed into thinking what is in "everyones" best interest. And if you happen to fall outside the lines of their utopian universe... then they really do not want to think about what to do next.

I can remember walking into a pizza place once and wanting half mushroom and half peperoni. There was no price set up for a half and half pizza. They were completely baffled as to what to do. Obviously charge me for a one topping pizza! They flat out would not do it, and seemed to be OK with loosing a sale over it.

We are becomming a nation where no one can... or wants... to think for themselves anymore. I think it is sad....

 

[ERD50]

This is one of the clearest examples I have seen yet as to what happens when govt regulation gets involved, and a "one size fits all" approach is taken to finance.

....

I can remember walking into a pizza place once and wanting half mushroom and half peperoni. There was no price set up for a half and half pizza. They were completely baffled as to what to do. Obviously charge me for a one topping pizza! They flat out would not do it, and seemed to be OK with loosing a sale over it.

We are becomming a nation where no one can... or wants... to think for themselves anymore. I think it is sad....

While govt regulation often does lead to "group think, one size fits all", it isn't the only cause. Just like your pizza example, where I assume there was no govt involvement in setting the price or condition of a pizza transaction, businesses get stuck in ruts. In that case, probably because they rely on low wage employees, and don't really depend on them to make smart decisions (pros/cons to that, but it is what it is).

Generally, in a really competitive market, the business will do more of the "think outside the box" stuff,.

-ERD50

 

[Texas Proud]

I can remember walking into a pizza place once and wanting half mushroom and half peperoni. There was no price set up for a half and half pizza. They were completely baffled as to what to do. Obviously charge me for a one topping pizza! They flat out would not do it, and seemed to be OK with loosing a sale over it.

Not obvious at all

Heck... charge you for a two topping pizza... you are asking for two different toppings aren't you?

 

[Bestwifeever]

Our pizza places always charge for two toppings for ordering what you describe, Armor99. Don't ask me how I know

 

[Koolau]

The pizza story kinda reminds you of the scene in Five Easy Pieces where Jack Nicholson's character wants plain toast (if my 1970 memory serves). Since they wouldn't (couldn't) give him plain toast, he "suggested" that they sell him a toasted chicken salad sandwich, hold the mayo, hold the chicken salad. Jack was the only thing I liked about that movie - too young I guess, not yet beaten down by life - and bankers.

I sorta flashed on that as I lived my original banking saga (stuck in the 60s and 70s again, I guess).

clifp - I think the banker picked up on the income from my taxes. He didn't mind that it was a conversion as long as it was "consistent" over time. The assets got "looked" at but not given much weight, although I wasn't told what their algorithm was.

 

[harley]

Our pizza places always charge for two toppings for ordering what you describe, Armor99. Don't ask me how I know

Pizza Hut and Dominos (around here) both would only charge for one topping. So would the non-chain places I go to. Can't speak for them all. Only one pizza worth of toppings is used. Maybe they're charging you for the extra labor involved.

 

[aaronc879]

I've worked part-time at Dominos off and on over the last 11 years and we always charged for 1 topping in that situation.