My Mortgage Loan Modification -- Fear and Loathing and Fannie Mae

With the inter-webs, the newspapers, and CNN all buzzing about mortgage loan modifications, I thought it might be fun -- and maybe even helpful to others -- to relate my experiences.

As I write this, I'm in the middle of negotiating with my mortgage company. It's not a situation that I thought it would ever be in, and to be honest I'm more than a little ashamed to find myself here. So, in the words of David Burns "how did I get here?"

It all started out not just innocently enough, but as an extremely positive situation, or so I thought at the time. My girlfriend and I been living together for about six months and had become totally committed to each other. We decided it was time to get a house.

This was back in April of last year. At that point, it looked like the mortgage market was at a bottom. It seemed like the perfect time to buy a house, and no one seemed to think that prices would fall yet farther. So we begin our search. It didn't take long before we discovered a house that was perfect for us. It had a huge basement where I could install my home-based business and plenty of room upstairs to entertain and even for houseguests.

Another huge benefit was the loft, where we could keep our extra beds. We have several, some with really fancy headboards, mattress and mattress toppers. One even has a talalay latex mattress on it. We didn't want to store such a valuable latex mattress in the basement or something.

To top it all off, it looked like a steal. This is a house that had listed for well over half a million dollars only two years previously. We were going to pick it up for just over $300,000. We really could not believe our luck. Since it had already dropped almost a quarter million dollars in price, surely it couldn’t drop more, right? Well, as it turned out we were correct about that part of it. What we did not anticipate was the effect the coming economic collapse would have on our overall fortunes.

We get the mortgage, and move into the house...

Getting financing was not all that difficult in retrospect, but at the time the process certainly seemed more onerous than it ever had for me before. My credit wasn't super great, but it wasn't awful either. My FICO score was about 675. That was good enough at that point for me to pick up a loan of $320,000 at 6 3/8%. This would generate a mortgage payment of right at $2500 a month.

I know, that probably sounds like a really big mortgage payment to a lot of you. But the thing is, not only was this house going to replace our current rental, but it was also going to replace the commercial space where I had my business.

I run a home-based business with multiple websites. Most of them are standard e-commerce sites, and some of the equipment is fairly large. So, depending on what the economy is doing, and my product mix at a given time, I need anywhere from 1500 to 2000 ft.² of space to hold computers, desks, supplies and inventory.

Another huge plus for this particular house was the complete lack of any sort of HOA (Home Owners Association). In my experience, these are nothing but trouble. I am really fond of doing things my way and only my way. Having the little lady two houses down pass judgment on my flower bed is not my idea of personal autonomy.

So anyway, we had all the paperwork and then we began the home inspection procedure. The bank was extremely careful. We had no less than five separate inspections. We had the standard homeowners inspection service come over and give the house a once over. But that wasn't enough for this bank -- they also wanted someone to come and do a check specifically of the foundation, they said this was because the home had been vacant for about nine months, but I really don't know. Then we had another guy come over to take a look at the air-conditioning and heating and electrical. And then the foundation guy found some issues so we had to have the original home inspector come back over again. It was a huge pain in the butt, but we finally got it done.

In any event, things moved at a record pace. Our real estate agent was a whiz at getting things done and scheduling things promptly. We closed on this place on Cinco de Mayo 2008. We were very happy, and looking forward to making all the changes that would make this house our home.

This is the end of part one. Click the end of this sentence to read the next chapter in the sad and sordid tale of my mortgage modification.