Thank you for telling these stories. Once upon a time in art school, the few professionals that came to speak to us (or that we attended studio tours of) would say things like "I just applied for [prestigious award/job/opportunity] and got it" or "[Famous person] just called me up and asked if I wanted to work on [amazing opportunity]." I commented to one of my professors that it wasn't very helpful. Stories like yours are what we needed to hear!
I really hate the way people try to sell this profession as some sort of magic realm. It's a key person business - riskiest kind. And it is labor. Working class. Tell the truth.
I’ll try to make this as short as possible. I saw The Big Short and it is an excellent movie. It doesn’t sound like you had the type of loan described in the movie. Those were no doc stated income 100% financed pay option Adjustable Rate Mortgages (ARMs).
No doc meant you didn’t have to prove what you said
Stated income meant you said whatever you wanted
100% financed meant no money down
Pay option meant there were three options you could pay monthly. One option was the fully amortized amount, that is, if you paid that amount for the entire period of the loan (usually 30 years) it would be paid in full. The second option was interest only. This meant that you would never fully own the house no matter how long you paid because you were only paying interest. Most contracts had a termination date so if you didn’t pay the principal amount by that date you would have to get a new loan, sell the house, or it would face foreclosure. The third option was to pay less than the amount that interest would require and thus owe more for the home each month, usually up to a set amount of 110-120% of the original loan at which time your payment would have to be the fully amortized amount then currently owed. Most people paid this amount.
Adjustable rate meant the interest could go up based on a mortgage index, usually the London Interbank Offering Rate (LIBOR). The adjustment period could be monthly, quarterly, every six months, or yearly, depending on the loan.
These loans were shyte and were hard sold by mortgage brokers because they had higher interest and the lenders provided large kickbacks and “bonuses”. People who could have gotten better loans were steered into this loans because of this.
It really is a good thing that you didn’t refinance into one of these loans based on your home’s appreciation.
I was an investigator with the California DRE at the time and could really bore you for hours on this subject. Sorry.
That's really interesting and informative. I don't recall all the details of my original loan. I recall I refinanced years later when I had an income spike. There is no way I could have qualified for that original loan. I had nothing like adequate income.
You are right that artists should be very wise about their money. It was amazingly smart of you to not fall for the traps of buying more home than one can afford which is walled in with scammy loans and interest rates. One of my friends worked at one of the banks that created those CDOs and he warned me back in 2005 to avoid the same traps and save cash for the coming crash.
Long story short, when everything went to hell in 2008, we moved west to a where homes were still affordable. In 2017, we finally saved enough for a small little home and mortgage with a low interest rate. Just in time before before things became out of reach. Thank god that we have a home cost well below going rental rates, especially when my artist income has crashed.
This all brings up an excellent point that artists and art students should do themselves a huge favor and get a bit of an education in business, economics and finances. It's helped me dodge some costly bullets over the years.
In case you missed it, Colleen got lucky with her subprime mortgage. But it wasn’t just luck. Another factor is that she skewed.
But the 6-10 million she referenced skewed not to being so sensible.
Up in this part of the nation, people got EZ subprime mortgages so they could pay inflated prices for homes. Those subprimes of course weren’t fixed rates so as the rates increased those EZ mortgages got unaffordable to maintain. And flipping the homes didn’t work well because — again — inflated prices.
On top of that was the disgraceful s*** show that was TAMP, a federal program to make refinancing reasonably easy. Except it was contingent on lenders or the buyers of the mortgages being cooperative and… that usually didn’t manifest.
And for POV: I had some experience dealing with this garbage.
You were lucky to buy a house. Timing is everything. When trying to buy the house next door to my then mother-in-law's house in 1979. My first wife and i found it impossible to get a loan. The interest rates were around %20 and the banks wanted %20 down. The banks also wanted a ready to live in house that would pass their inspection. The house was being flipped by a neighbor and wasn't finished. The flipper agreed to finance the house and we paid him the mortgage payment of $184.32 every month.
I thought that the high down payment requirements by banks were crazy. Years later congress lowered the standards for obtaining a mortgage. It was then fairly easy to get financing. That's when you got to buy your house at just the right time. The easy to obtain loans caused a boom in the housing market causing home prices to increase.
Like so many things in life, timing is everything.
Yep, pretty much it. There is no way on God's green Earth someone who made $13,500 that year should have gotten a loan for a home. I'm so sorry you had that trouble. I was in just the right place at the right time.
I'm sure many people have told you this, but: if you wrote a memoir I'd buy it!
Thank you for telling these stories. Once upon a time in art school, the few professionals that came to speak to us (or that we attended studio tours of) would say things like "I just applied for [prestigious award/job/opportunity] and got it" or "[Famous person] just called me up and asked if I wanted to work on [amazing opportunity]." I commented to one of my professors that it wasn't very helpful. Stories like yours are what we needed to hear!
I really hate the way people try to sell this profession as some sort of magic realm. It's a key person business - riskiest kind. And it is labor. Working class. Tell the truth.
I’ll try to make this as short as possible. I saw The Big Short and it is an excellent movie. It doesn’t sound like you had the type of loan described in the movie. Those were no doc stated income 100% financed pay option Adjustable Rate Mortgages (ARMs).
No doc meant you didn’t have to prove what you said
Stated income meant you said whatever you wanted
100% financed meant no money down
Pay option meant there were three options you could pay monthly. One option was the fully amortized amount, that is, if you paid that amount for the entire period of the loan (usually 30 years) it would be paid in full. The second option was interest only. This meant that you would never fully own the house no matter how long you paid because you were only paying interest. Most contracts had a termination date so if you didn’t pay the principal amount by that date you would have to get a new loan, sell the house, or it would face foreclosure. The third option was to pay less than the amount that interest would require and thus owe more for the home each month, usually up to a set amount of 110-120% of the original loan at which time your payment would have to be the fully amortized amount then currently owed. Most people paid this amount.
Adjustable rate meant the interest could go up based on a mortgage index, usually the London Interbank Offering Rate (LIBOR). The adjustment period could be monthly, quarterly, every six months, or yearly, depending on the loan.
These loans were shyte and were hard sold by mortgage brokers because they had higher interest and the lenders provided large kickbacks and “bonuses”. People who could have gotten better loans were steered into this loans because of this.
It really is a good thing that you didn’t refinance into one of these loans based on your home’s appreciation.
I was an investigator with the California DRE at the time and could really bore you for hours on this subject. Sorry.
That's really interesting and informative. I don't recall all the details of my original loan. I recall I refinanced years later when I had an income spike. There is no way I could have qualified for that original loan. I had nothing like adequate income.
Holy smokes! What a string of lucky coincidences and smart moves. This feels very relatable. Thank you for sharing, Colleen!
You are right that artists should be very wise about their money. It was amazingly smart of you to not fall for the traps of buying more home than one can afford which is walled in with scammy loans and interest rates. One of my friends worked at one of the banks that created those CDOs and he warned me back in 2005 to avoid the same traps and save cash for the coming crash.
Long story short, when everything went to hell in 2008, we moved west to a where homes were still affordable. In 2017, we finally saved enough for a small little home and mortgage with a low interest rate. Just in time before before things became out of reach. Thank god that we have a home cost well below going rental rates, especially when my artist income has crashed.
This all brings up an excellent point that artists and art students should do themselves a huge favor and get a bit of an education in business, economics and finances. It's helped me dodge some costly bullets over the years.
Just to enlighten readers:
In case you missed it, Colleen got lucky with her subprime mortgage. But it wasn’t just luck. Another factor is that she skewed.
But the 6-10 million she referenced skewed not to being so sensible.
Up in this part of the nation, people got EZ subprime mortgages so they could pay inflated prices for homes. Those subprimes of course weren’t fixed rates so as the rates increased those EZ mortgages got unaffordable to maintain. And flipping the homes didn’t work well because — again — inflated prices.
On top of that was the disgraceful s*** show that was TAMP, a federal program to make refinancing reasonably easy. Except it was contingent on lenders or the buyers of the mortgages being cooperative and… that usually didn’t manifest.
And for POV: I had some experience dealing with this garbage.
Just so y’all know.
You were lucky to buy a house. Timing is everything. When trying to buy the house next door to my then mother-in-law's house in 1979. My first wife and i found it impossible to get a loan. The interest rates were around %20 and the banks wanted %20 down. The banks also wanted a ready to live in house that would pass their inspection. The house was being flipped by a neighbor and wasn't finished. The flipper agreed to finance the house and we paid him the mortgage payment of $184.32 every month.
I thought that the high down payment requirements by banks were crazy. Years later congress lowered the standards for obtaining a mortgage. It was then fairly easy to get financing. That's when you got to buy your house at just the right time. The easy to obtain loans caused a boom in the housing market causing home prices to increase.
Like so many things in life, timing is everything.
Yep, pretty much it. There is no way on God's green Earth someone who made $13,500 that year should have gotten a loan for a home. I'm so sorry you had that trouble. I was in just the right place at the right time.