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As an isolated small town, Salida is not especially worldly or cosmopolitan. But life here may impart more financial wisdom than Washington or Wall Street, where the subprime mortgage meltdown continues toward full panic mode.
In recent years, lenders were generous with home mortgages. As long as housing prices kept climbing, it worked out. If somebody defaults on a $200,000 loan and the house will fetch $300,000 at a foreclosure sale, then the lender comes out ahead. But if there's a default on a $200,000 loan and the house is worth only $100,000, then the lender has problems -- especially if there are thousands of such loans.
Where does Salida fit? While I was emptying the trash one morning a couple of years ago, I saw a friend, Sue Conroe, across the alley. That house was for sale and she was looking at it.
The next time I saw Sue, I asked if we were going to be
neighbors. No,
she said. The price on that house
might be reasonable by current standards. But I grew up
here, and I remember the busts as well as the booms. I
don't want to be on the hook for that much money if things
go south -- and in Salida you know they will, sooner or
later.
I didn't grow up here, but I knew what she meant. I'd
finally given up on correcting people who said You were
so smart to hold onto that little house on Third
Street.
Intelligence had nothing to do with that. The simple fact is that after we bought a bigger house in 1989, we tried to sell that little house. We even dropped the asking price from $30,000 to $28,500, and in two years, we received not a single offer.
Real-estate prices do not always climb. But they had
finally risen enough for us to sell that house early this
year. We used some of the proceeds to pay off a home
equity line of credit
from Washington Mutual on this
house.
Or at least, we have tried to pay it off. First we called and got a pay-off amount, which included a prepayment penalty, which they stressed while trying to talk us out of paying off the loan. We went to a local bank to arrange a wire transfer before we faxed the signed paperwork. WaMu refused to provide a routing number, stating that it didn't accept wire transfers for paying off lines of credit.
I had never heard of a bank not accepting money, no matter how it came in, but we played along. We got a cashier's check and sent it and the paperwork by overnight express to WaMu. A few days later, we got a statement saying our balance was $0.00, but the line of credit was still open.
We wanted it closed. Martha called. WaMu said that since these accounts involved special checks and a credit card (neither of which we had received or used), the bank had to wait 30 days to be sure nothing was still out before closing the account. That was in January.
Last week when I called, they said up to 90 days, and in the interim, we'd received new WaMu credit cards we could activate against this line of credit that we wanted closed. Altogether, we spent about two hours on the phone with WaMu, most of it on hold with cheery recorded messages about new ways we could borrow money.
I asked a local banker if this delay would improve
WaMu's stock price if it were being done on a few thousand
accounts simultaneously. No,
he said, it
shouldn't matter there. But they're in the business of
lending money, and that may explain why they're not in any
hurry to close that account before you might slip up and
use it.
But he also brought up the old saying: Never
attribute to malice what can be explained by
incompetence.
Either way, it could explain the current national financial crisis. Even when you've made it clear that you want to quit borrowing money, the lenders persist in trying to change your mind, and meanwhile, the mortgage industry seem to have forgotten something that Salidans have known for years: Prices rise -- and fall.
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