Rather than put the important part of this blog at the top of the column, I’m going to tell you a story. Please bear with me. The point of the matter will become very, VERY obvious.
The Missus and I recently decided to refinance our home. Several reasons to do so, not the least of which was a reduction in our interest rate by more than two-percent. Most financial advisors will say that’s reason enough. Having bought and sold many homes, we figured things would be pretty familiar. Wrong!
With our excellent credit standing and lack of significant debt, we really had little trouble qualifying. It was what we had to go through to get to the closing stage.
You’ve never seen such a pile of forms! We probably accounted for at least an entire tree from an old growth forest. My count is 63 signatures by each of us. Then, of course, all those forms had to be copied so we had a stack, the broker had a stack and the lender had a stack. Better make that two trees because - in the end - the title company had a stack.
Many - far too many - of the documents had no other reason than to cover someone’s backside. Even the loan broker could not offer a coherent reason for a number of ‘em. But the one that stands out in my mind is the one that certified who I am. The Missus had one, too.
It read something like this: “I, Barrett Rainey, certify that I am Barrett Rainey.” Then I signed it “Barrett Rainey.” Of course, that form had to be notarized. Which was done by someone who wasn’t even in the office! They were in another state! But, had these forms been left out of the tree-killing exercise, our loan wouldn’t have been approved. Made no difference what our credit was or what our assets may have been or our income. We had to self-certify that we are who we say we are. Some gibberish about “the Patriot Act” as I recall. My brain still has not made the connection. Sometimes it’s best to just get through the obstacle course alive without much knowledge about the process. Like sausage-making.
Then - wait for it - all of this paperwork - all of it - was sent to us electronically. Again. All of it. Multiple times! Because the broker who started it had to furnish it. The bank carrying the loan had to furnish it. The closing agency had to furnish it. And each had to be notified - in writing - that we had been furnished it. All of it! Can’t you just hear those saws working in the forest?
But there’s more. The whole tragic point of our experience was yet to come. Everything was signed, sealed and delivered. And the hurdles, inconsistencies and lunacy of those weeks will be just so many memories.
Except for this. Here’s what we learned when it was all over. All those signed and notarized documents have been sent off to another mortgage company somewhere else. They’re being copied - again. Then they’ll be bundled with similar new loans and sold through another money market to investment companies. There, they’ll be sorted out, re-bundled and - wait for it - sold into the world markets. Can you say “derivatives?”
This is one of the major calamities that nearly collapsed our financial markets several years ago! We’ve been here before! We’ve read the book AND seen the movie! And it’s happening again!!! Add to that the news from London that a young banker lost more than $2 billion in six weeks by doing what? Doing WHAT? Selling derivatives!!!!! Likely our home loan! (more…)