Tag: payment

Life in the Spin

Random Thoughts

There was a great quote on Commander-in-Chief a couple weeks ago, and yes, I am aware that the wife and I are probably the only ones watching the show. Anyway, the quote was the mother of the President reflecting back on her days as a young ERA advocate and she said something like, “I preferred spin back when they called it lying.”

Honestly, that is how I feel. I hate that people try to make lying okay by calling it spin or damage control. When you are asked a question there are three answers: Yes, No, and I Don’t Know. “Yes” means you tell the truth. “No” means you lie. And “I Don’t Know” means you cannot answer the question and you side step it or put it off until later. It seems that these days “I Don’t Know” is something people are scared to say, and so they’ll try to twist some lie into the truth they think you want to hear.

My most recent encounter with this is with Home Mortgage Loans. If you can’t afford to put a sizable down payment on a house, you’ll likely be offered an 80/20 loan. This means you get two loans, one for 80% of the cost and another for the remaining 20%. The main reason this is done is to avoid Private Mortgage Insurance (PMI). PMI is basically you paying up to a couple hundred bucks a month insurance for the bank so that they don’t get screwed if you default on the loan. Most loan companies have a rule, if your current monthly debt payment plus the mortgage payment is greater than 45% of your monthly income, they won’t do 80/20 with you, they’ll do 100 with PMI. Pretty standard.

Now here comes the “spin”. The loan officer will likely tell you something along the lines of, “Since you don’t qualify for our 45% debt to income ratio, what we can offer you is a 100% mortgage loan, with a slightly higher APR, but a lower monthly payment.” The lie here is two fold. First off, the only reason you get a lower payment (supposedly) is that the loan is likely to be some sort of Interest Only or ARM loan, which means you pay Interest up front, or at least a high percentage of Interest. The payment is lower because the bank is willing to let it be lower since they will be getting “their” money first, because the bank earns its profit in the interest. See, if your payment is Interest Only, you are not paying anything into principle, and this means you don’t really own anything of your house, except appreciation of value. Buy a house at $200k and pay only interest, when you sell it you will still owe the bank $200k. The only thing you get to keep is anything that is left over $200k after all the fees are paid. And if you just did the math… if your house didn’t appreciate in value in excess of the agent commission and taxes, you could actually lose money when you sell your home. Now the second part of the lie… your monthly payment? It will likely be higher. I know what you are thinking, “Didn’t the loan officer just tell me it would be a lower payment?” Well, yes, and technically, in an I’m-an-evil-banker sort of way he’s not wrong. The PI (Principle & Interest) payment will actually be lower on the new loan as opposed to the 80/20, by as much as a hundred dollars a month. But, with the new loan, in addition to the PI, the taxes, and home insurance, you will need to also pay PMI which is likely to be one hundred fifty to two hundred dollars.

So, here is the logic… you fail their ratio, meaning that they don’t believe you are a worthy risk due to your ability to pay, and in return for not making enough money they will force you to pay more. It just doesn’t make any sense to me. Why doesn’t the loan officer just say, “Given the price of the house and the payment schedule, we recommend you find a cheaper house.” At least that would be honest. It is almost like they want you to default on the loan…

Special Treatment

Random Thoughts

One of the things I have come to hate over the years is “equality”, mostly because people just don’t use it right. To me, equality means equal opportunity. The door is there, whether I open it and go through it is up to me, but the door is there. Too many people, however, see equality as meaning true equality. If there is a door, and I make the effort to open it and go through it, they should be allowed to go through it too, even if they don’t do the work.

Tied in with this is the concept of trust. Trust is something you earn by being consistant, and when you are trusted, you will be given benefits that less trust worthy people don’t get. Lots of people see those benefits as being “unequal” because they don’t grasp that if they work and become trustworthy, those benefits will be given to them too.

My rent is due each month by the 5th. If you are late, you have to pay a late fee… fair enough. There is a deadline, you miss it, you are penalized. However, since in the past they have run into deadbeats who bounce checks when they are late, my apartment complex requires that late rent must be paid with a cashier’s check or a money order. I’ve lived there for three years, and in three years I have never missed a payment until now. I’m perfectly willing to pay the late fee. I’m late, I don’t deny it. But I asked if, given my payment history, I could be allowed to just write a personal check. They said no. I asked why and they said it was policy, no exceptions. I could totally understand if they demanded all rent in certified payment, but its only the late rent. I tried to pursue it, since I’ve made the last 36 or so payments on time and never bounced a check, but she cut me off, said no again, told me to have a nice day and hung up.

On the other hand, I went to the bank to get myself a cashier’s check for the late rent and the bank manager said that since I’d been a loyal customer for over ten years, they would happily wave the fee for the cashier’s check. Meanwhile, the guy next to me, who was also getting a cashier’s check and was paying the fee, said he thought it was real nice the bank rewarded loyal customers and he looked forward to doing business there for a long time to come.

So today is a loss and a win. More loss than win though, since the late fee on the rent is much much larger than the fee for the cashier’s check. But hey, I’ll take my wins where I can get ’em.