The Mortgage Re-Fi Blues

As so many of you have, I am currently refinancing my mortgage. It’s for the usual reasons; a modestly lower rate and smoothing our tax planning. Having run through this gauntlet in the past, I thought I knew what to expect and my loins were girded. Ah, the folly of certitude.

In the years since the Great Recession the process has become even more burdened. Both by increased regulatory oversight and the belated prudence that financial bureaucrats exercise when they have been singed by past experience.

On top of all this, every time there is a successful lawsuit covering some aspect of the process in your jurisdiction, more paper and more verbiage is added to the stack. We can always count on our friends in the legal profession to pile on, especially after the barn door has been opened.

I got a referral for a good mortgage broker from our financial advisor, whom we trust and who deals with these sorts regularly. On the plus side, the broker has been straightforward and efficient. So is the Grim Reaper, come to think of it….

The broker cheerfully admitted that the process is onerous, even without glitches (as if…), but vowed to do everything possible to make it smooth. “And it will only take 60 days!” she bragged. What?

Wary, and curious, in spite of her claim that she would be doing all of the leg work, I have been keeping track of the time and expense we have been putting in to facilitate this process. So far, and we are at Stage 2 of a promised 4, we have invested at least eight hours of rummaging, collating, copying, writing, faxing, mailing, and notarizing.

And speaking of “investment,” let’s not forget the appalling list of fees you pay up front for the privilege of going into major debt. For instance, there is the appraiser. He spent a grand total of nine minutes at our place, culminating in a 15 page computer-generated report. Oh, and a $500 fee. Cash too, don’t you know.

In a previous refinance, that time for my professional building, the appraiser surprisingly asked me what I wanted him to put for a valuation. I told him that I was not looking to increase my loan, just get a better rate. And when the report came in, it was surprisingly low-valued for our market. So I called the appraiser to ask out of curiosity why it was so low and he said “I get more business from the banks if I keep the valuations low.” Both my contacts with him were less than reassuring of the integrity of the process, seeing as how value reality played so little role in either interchange.

And the fees go on and on. My condo management company charges $350 just to copy the rules governing my development. The credit companies charged $135 to remove an obvious error. And on and on, everyone wants to feed at the trough and we, the consumer, essentially have no leverage. We’re over a barrel if we want to get the deal done. The competitive market place has not brought the costs down either. Does this sound fishy?

Let me close with a story that I told the last time that I went through this painful process. In 2000, George Bush’s first Secretary of HUD was a legislator from Florida named Mel Martinez, who had apparently been a renter. When he moved to Washington DC to assume his new post, he decided to buy a home.

He was just as horrified at the mortgage process, and escrow closing, as we all are. So he said “I am a lawyer and the Secretary of Housing and Urban Development and I can fix this.” So he dutifully wrote legislation, simplifying the process, speeding up the time involved, and decreasing the cost. He submitted the bill to Congress as a consumer breakthrough, he thought.

That’s when the lobbyist heavyweights for the mortgage, escrow, and realty industries became aware and took action. They promptly squashed the bill like the cockroach they thought it was and the bill never even made it to committee review. And who remembers Mel Martinez?