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

[harley]

I'd like to chime in with Nords on the credit union idea, and the people who said to shop around smaller banks too. I recently refinanced, and we are in a similar position, with no income stream at all. I networked around a bit, and found a mortgage broker who is a friend of a friend. We were able to work out a pretty satisfactory deal. I bet you'll be able to too.

I don't blame you a bit for losing it, although the person n the receiving end probably didn't put together any of the CDSs the bank is holding, which is why they can't loan money to a person with an 820 FICO score.

[Dave J]

Quote:

Originally Posted by Koolau Next, we've worked long and hard (Beevis and Butthead - give us a "heh, We don't really want to cash in our I-bonds because they are difficult to come by (we used to be able to buy $60K/year and now only $10K.) These bonds have some unique advantages which we don't want to lose. . Also, since we already own a property which is paid off and is worth nearly as much as the new property, our plan is to buy the new property, sell the old property and then pay off the mortgage - all in less than a year. So, a no-points mortgage at 5% is a pretty cheap way to accomplish our other retirement goals, we think.

Since you are only looking at a 1 year period, take out non-mortgage loans using your CD's and I-bonds as collateral. Pay it off in one year and then you don't have the hoops to jump thru.

[copyright1997reloaded]

Quote:

Originally Posted by Koolau We had actually considered that, but (long-story-longer) our assets are made up of (in order of highest to lowest dollar amount) 401(k)/Traditional IRAs, Roth IRAs, I-Bonds, CDs/cash.

[Sympathy on: I am about to retire (and maybe will even post one of those "Hi, I am... entires) so I will soon be feeling your frustration.]

Your 401(k), Traditional IRAs, and Roth IRA's mean nothing/very little to the bank in terms of collateral or ability to pay because they are not attachable in bankruptcy (usually). Here's a decent summary of the protections:
TIAA-CREF - Bankruptcy Protection for Retirement Plans and IRAs

[gryffindor]

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.

[chinaco]

Quote:

Originally Posted by clifp How does one get laid off when you are retired? Considering that his income consists of SS (wife) and small pension, I don't get why the bank would be worried having his income be cut. Chicano, you may want to reread the post..

Whoops.. your right I skimmed it. I thought he was working.

Still the same applies... The income could be interrupted (e.g. death, nursing home, etc). The older we all get, the more likely the event.

Banks have become more conservative.

[Zoomie]

Things change.

[haha]

Quote:

Originally Posted by gryffindor 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]

Quote:

Originally Posted by gryffindor 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]

Quote:

Originally Posted by Nords 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.

Quote:

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]

Quote:

Originally Posted by Nords ... 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]

Quote:

Originally Posted by NW-Bound 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]

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]

Quote:

Originally Posted by Koolau ... 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]

Quote:

Originally Posted by Koolau 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]

Quote:

Originally Posted by ERD50 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....