The real effect of the mortgage crisis on a real person

Looking over the housing markets, and considering the negative sentiment out, I decided that this was a good time to purchase a new home. Rates are 5.875% fixed and many home prices are depressed currently. And I’m not alone in my decision to pick up some property. So I wanted to share my experience so far, and at the end of this post I have 2 questions for you my reader.

Many who have good to excellent credit ratings, and available cash are out looking for a new home or a first time buy. But don’t believe this is exactly a buyers market. Even in a dying economy that is the Binghamton New York experience, home prices have held firm if not risen up. In fact I would say that prices over the last 6 months have risen about $3,000 on median. Because many like myself are entering this troubled market.

Still there are bargains to be found. I am looking into a couple as this is being written, and is part of the reason why I have not been writing as much as normal for both of my blogs. [Of course having built and set up over 100 blogs in the past 2 months, the deal with TV One, and working out a deal with an upcoming magazine are factors as well.]

Part of the process in getting a home is the mortgage pre-approval process. For those that are unfamiliar this is the initial amount that you may be able to get a mortgage for, the loan rate, and all other terms you might run into. It is affected by your credit rating - heavily, cash on hand, and income as per taxes filed.

Now without giving away too much of my finances (some points I will deliberately extrapolate on – so the figures on income and pricing are inaccurate but the situation and rates are accurate) I will make you aware of what the world is like for me. You can decide if my skin tone and last name are factors or not.

My first stop in the process was my local bank, NBT, which I have had accounts with for several years. I believe I had 1 check bounce in the entire time I was with the bank, and that was because of a bank error in depositing funds into the proper account. I also know and speak with a couple of managers on a regular basis. Thus you can say my relationship with the bank is favorable to friendly.

I initially was given an indication that my pre-qual rate would easily be what I had asked for. My credit rating is 750 (after rebuilding my credit after a career change in 2001) with at least one agency ranking me at 766. That is considered good to excellent. It would normally grant a lower credit rating as I am a low risk. I also have no long-term debt. Thus the initial loan rate mentioned was 6.11%. I have a witness to this.

I was rather pleased.

But after looking at several homes, and having requests from the bank for additional tax records for my corporation and myself – which I provided promptly – I received my pre-approval line. 7.11% and a reduction in the dollar loan amount of 27% [ie. if I asked for $100,000 they approved $73,000]. But I was assured that this is not accurate and I could be approved for more if I found a home in the range I was initially looking. Though no mention was made of what interest rate would go with this higher loan dollar amount.

Now I am insulted. I went from a very good interest rate and a decent yet highly affordable mortgage (fixed rate 30 years) to a bad rate – 1% higher than initially suggested and documented and 1.235% higher than the national rate – and a dollar bracket that provided access to homes far inferior to what I had wanted.

I will add that I have an income that surpasses the local area average, in excess of 2x’s, and never had a bankruptcy. There was a surplus of cash in my bank account - as there has been for over a year - that easily surpassed the 3% required for the loan by the bank. I have been operating my business for 2 years, and have been in the field of work for over 7 as an independent consultant. I have never been sued and was a successful stockbroker for roughly a decade.

I believe the increase in rate and decrease in dollar loan amount is insulting. I was given a reasoning that my credit report had bad notations (which I have reviewed for well over a year and cannot find), I have inadequate cash reserves (which I noted above), I do not make enough money for what I was requesting (which I and the initial loan officer determined I had far in excess for the amount requested beyond the local area average), and I failed to have enough funds to meet the 3% closing requirement (which I had in excess of 7% sitting in the bank).

Now what factor could be the reason for the change? What could motivate such an extreme reaction?

The loan officer that questioned me, and needed additional documents, never met me. He did speak to me (getting my last name wrong a couple of times). So what changed? Could it be that my actual last name (which is Spanish and yes Vass is a registered alias I use for business to avoid racial prejudices since I was a stockbroker) was too ethnic? Was it that my income too far exceeded the income of most of the 3% African American population in this area – as well as exceeding the White population income average.

Obviously I went on to seek out a separate mortgage loan via a broker that is Hispanic, and the brother of a friend. My preference was not his background but that I knew his brother whom I speak with regularly.

It has been over a week since placing my documentation with him. He is quite successful in getting mortgage loans, and owns his own brokerage. He too had high expectations for my loan. His opinion was that my dollar loan amount was very reasonable and in my affordability range. He could not understand why a bank I had been doing business with for years could not provide me a better rate, which he believes will be in the 6.4 – 6.6% range. Based on my cash on hand he believe that he might be able to get that percentage down to 6.25% (obviously the difference [from 5.875%] is for his own operating profit, which I do not begrudge him. This is business after all and we aren’t doing this to not make a profit).

Why am I facing a delay? Because the bank has suspicions that I am hiding money. Because I own my own business the bank that the broker has gone to believes I may be laundering money. Now the United States Government, via the IRS, has had no problems with my finances. My income has been steady with a respectable increase to my top line revenue for years. Every dollar that comes in is documented, and every write-off is noted and within legal allocations. I do not make excessive amounts of money (Bill Gates, or even several stockbrokers I know, make significantly more), I am just a regular small business owner.

So what could be the reasons? My last name is the reason some friends have mentioned to me. I’m ethnic and not generic like Smith or Hannity, or O’Reilly. I am immediately identified as at least Hispanic, and noted on some government documents as Black and Puerto Rican. And I live in an area that is 95% White, and comparatively a small town. Not to mention that a high percentage of those in the mortgage crisis are African American and minorities – though why they were selected and focused into these one-time highly profitable (for the lender) loans is unknown (sort of).

What do you think? Can you imagine a reason why banks would have a problem loaning money to a low-risk, no debt, middle-class income, single, business owner, who normally pays taxes (no refunds for me) is in his affordability range and has never had a bankruptcy or problem with the IRS?

Do you think if I was White, with exactly the same conditions I would be treated the same?

Before you answer here is another fact. Less than 3 weeks before interest rates were lowered, and prior to my first loan query, I had a friend that was pre-approved for a mortgage up to 75% greater than what I asked for. They had a 750 credit report. They are a single parent. They make 50% of my own income. They had a gift provided to cover closing costs and down-payment (which I do not begrudge).They are almost 20 years my junior. And the final loan amount was for a home in the range I am seeking, with an interest rate of ~6.75% (closing after rates dropped).

The big difference between us? Besides the income, that I am a business owner and not an employee, my age, and that she is a parent is that she is a White woman.

And for those wondering what the big deal about an extra 1.235% is that over 30 years (which I can affordably pay off in 5-6 years) there is an extra $20 - $50,000 dollars in interest to be paid.

So now I ask, why do you think I have been treated as such so far? Is this something others are experiencing across the nation?

Senator Obama "bitter", and the other Presidential candidates

So now we have the major news media jumping all over the words of Senator Obama. This time it’s in reference to his elitist comments about how small town voters across America seem to feel and are acting. While the comments are harsh, there is some truth in them.

“They get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations,” Barack Obama

Having lived some 5 years no in a small town (that residents of the area consider a city for some reason) I have noticed that many are clinging and bitter. There is no question that in this town with approximately 6% non-whites and a large community of college students, there are bitter feelings. The average income is about $28,000 and jobs are scarce. Most jobs pay minimum wage, the downtown district is littered with empty buildings, and more than just a few homes are in disrepair even in the best neighborhoods.

There is a huge hunting community though, and there are an abundance of churches and church groups. The main activity outside of these events is drinking. In a recent article in the local paper there was a story (during Black History month) describing that one of the local major companies recruited new workers and when asked what the recreational activities were in the area they stated ‘there are a lot of bars’. Such is this small town in central New York, and that is better than the surrounding smaller towns and villages.

That says nothing of the rampant racism and prejudice. I have heard numerous stories from non-whites over the years, and experienced several myself. From failure to be served for over 15 minutes only to be skipped over to serve a White patron that walked up, to being called the N-word for speaking to a White person of the opposite sex, to having a drunk guy picking a fight – using the N-word to provoke the situation – and being told at the end that it was due to dressing better than those around [which happened to me]. Binghamton is a city dying for lack of good jobs, lack of foresight from the city council, and the failure of Senator Clinton to live up to her promise to generate 200,000 new jobs for upstate New York [in fact upstate New York has lost 30,000 jobs since she has been elected].

So is Senator Obama wrong in what he said? From what I have seen here and in the area, no. The citizenry is quite bitter and angry. They want to see less jobs going overseas, fewer immigrants keeping job wages down, and virtually hate anyone – especially of color – that is living here and doing better. Mind you that is not everyone here, but it is more than enough to make things uncomfortable is you walk into the wrong place on the wrong day.

But let’s consider this. If Senator Obama is out of touch or as Senator Clinton states

“I do not think he really gets it that people are looking for a president who stands up for you, and not looks down on you," said Hillary Clinton. "And after seven years of Americans feeling invisible to this president, President Bush, it is time that we leveled the playing field.”

Is Senator Clinton better?

Well we know as fact that she lied about being under sniper fire in Bosnia. Sinbad and videotaped footage of the event have proven that – thus it’s not a misspoken statement as the polispeak would have you believe. We know that she had no impact or input to the Ireland peace talks, those who did have told us about that lie as well.

We know that in the 7+ years that Senator Clinton has been representing New York State she has lied about new jobs, and her voting record reflects changing polls consistently. We know Senator Clinton is against guns, in speeches and votes. We know that the Clinton campaign has consistently and directly, in the form of Bill Clinton, used race as a factor in generating votes. The Clinton campaign has directly pandered gender as a solitary reason for votes. Is this “standing up” or “antipathy to people who aren’t like them”?

But perhaps most important is her connection to the people. Senator Clinton, along with former President Bill Clinton, made $109 million. They paid only $34 million in taxes. That may be a lot, but it is far less than the highest tax bracket so they took tax breaks available to them. They also donated $10 million to charity – the Clinton Library – in effect giving them a tax break and keeping the money. All from those that claim that the rich (which she obviously qualifies as) don’t pay enough in taxes and voted to increase the taxes paid of everyone making $31,850 or more (which I know none that would qualify this as rich).

Now both of the Democratic candidates have gone to good colleges and have law degrees. Senator Clinton spent her time after graduating on the board of Wal-Mart (which has fought unions – a big issue for Democrats) and being the wife of a rising political husband. Senator Obama spent his time working for the Chicago community and entering politics at the state level. Which sounds like it benefits the average guy more? Which sounds closer, since neither is similar, to the life average Joe lives?

Of course if we were to really be fair about this Senator McCain really stands out. While his wife does have wealth, he was a soldier. While he was an officer and a pilot, he did serve his nation at a time of war, and stood by his fellow soldiers while having years of torture. He has served the public for 25 years, longer than some of my readers have been alive. He has never lied about being shot at, nor has he made a donation to a charity he runs. He has not voted to raise taxes of those that are obviously in the middle class (though he did balk initially at giving them a tax cut). He is not known for looking down at anyone, though he is known for his temper. But he is also known for breaking party lines to make deals he feels benefit the American public – which the Democratic candidates have not done, ever.

So really, who sounds like they are looking down on the average American? Who is the least connected? Who has lied the least – or as the spin likes to say “misspoke”. Who has stood their ground and served the public the most, or in other word has experience?

Obviously for the Republicans that is Senator McCain. For the Democrats I leave the choice to you, based on the facts. And as for the election, well that is your choice. No matter what you believe, your vote makes a difference. If we all are involved, since we all will live with the results, then I believe we will get the best choice for America. But if not, there will be no way to explain the next 4 years in some polispeak spin of “misspoke” or “mistake”.

The Ohio Democratic Presidential debate

My initial impressions of the Democratic Presidential debate in Ohio are that this is turning out to be quite a match. So far Senator Clinton has been quite forceful in trying to make a stand on universal healthcare, and to a lesser extent Iraq. NAFTA was a sore point.

I found her whining about getting the first question on issues she has made comments on and obviously wanted to answer, and suggesting that Obama should be offered a pillow – like on Saturday Night Live – less than Presidential and weak. And for the record she has only gotten the first question 6 out of 10 times including this debate where she chose to answer the open question to both candidates.

Her seeming demand that her plan was better and that professionals thought so fell flat. She did not answer the question of what is affordable, and if she would cause penalties to come out of the paychecks of those that do not accept her plan. Obama made a good case why children need to be covered and parents will chose to be covered if given an affordable option.

I think it looked bad that Clinton would not let the issue end and had to try to get the last word in on that issue, as well as several others. I’m upset that 16 minutes were spent on universal healthcare because Senator Clinton did not agree with Senator Obama. Especially since this is not a program that exists right now, and other questions on issues that do exist were not able to be asked of either candidate.

In terms of NAFTA, her answers were weak. She had the worst answer possible about her promise to Upstate New York. In her bid to gain the Senatorship, she promised to create 200,000 jobs. What has actually happened is that 30,000 jobs left since she has been elected. That is a fact. The reason why was,

“Because I thought Al Gore would be President.”

A leader should not promise things they cannot deliver. A leader should make clear that a plan that requires unknown probabilities is not a promise. Because I can tell you many in Binghamton NY, where I now reside, remember the promise that was made and the numerous jobs that have been lost since that time; and how the area in Central New York is suffering.

Iraq is a big issue for both candidates. I personally do not agree with either of their positions. Thus rather than addressing how they debated this point, I will simply state that they both claim plans towards leaving Iraq.

I will say that on the issue of experience, which Senator Clinton claims Obama does not have, Senator Obama made a very good stand. He clearly outlined that his comments about acting against Al Quida in Pakistan back in the summer of 2007 is exactly what America recently did in killing the number 3 man in that organization.

I found the comments by Senator Clinton, butting in on the denouncement of Senator Obama to Minister Farrakhan because of his anti-Semitic comments, rude and unnecessary. It was an obvious try to try to corner Senator Obama as somehow being connected to Islam and the Nation of Islam. She attempted to embarrass Obama, asking him to reject on top of renounce Minister Farrakhan. To her annoyance, I imagine, he reiterated that he did both, renounce and reject. But what that had to do with her trying to get in that she supports Israel and Jewish people is beyond me.

In the closing statements based on the question what does your opponent need to do to win the nomination the answers were very telling. Senator Obama stated that Clinton was qualified and more worthy than Senator McCain, and took about 2 minutes in lauding her before he mentioned why he is after the nomination and why he felt he was better. Senator Clinton, by contrast opened with what made them both good candidates. She spent a minute discussing how “we are qualified” and “they both wanted the best for America” before continuing on her self-promotion.

Oh her not so subtle inclusion of gender seemed a pandering move towards women. As if she was the only one to be a history making candidate. That playing to women, almost as a fear tactic, was her battlecry. This contrasts the fact that Senator Obama never felt the need to emphasize that he is African American and that he would be making history and that this was the chance for Blacks to “change the playing field” as Senator Clinton implored.

Overall I felt Obama won the debate. He did not feel the need to press Clinton into a corner. He showed a very Presidential stance in that he took her attacks and rather than attack back he just answered the question. Unlike Clinton, Obama does not seem to need to hammer a fight to finality.

Perhaps the most telling thing is that Clinton felt the need to be unequivocal and final in her position about how Obama dealt with Farrakhan – a point that she was not involved with at all. She closed all options and demanded a response that met her standard. Obama worked as a facilitator, having a position and willing to take the extra step to get to a conclusion that he already agreed with.

That is the potential Presidents that we see. In Senator Clinton, a President that will demand and fight to get only and exactly what she wants, at whatever cost. In Senator Obama, a President that is level headed and willing to bend as long as he is in the direction he believes is right. Considering the differences between the Democratic and Republican political parties, which do you, think will be most likely to pass laws that the candidates are basing their nominations on?