Case Closed

Whew! Yesterday marked the end of a remarkable chapter in the life of our home. We finally closed the refinance of our construction loan. Normally this type of thing wouldn't result in a blog entry; I'm bad enough as it is with posts lately. But our refinance is a tale of deception, a local version of the banking crisis, and extremely good fortune (Providence?).

The front of the house nearly one year after we started work

Nearly one year ago, when we were still relatively on schedule with our renovations, I put down a deposit at Stellar One bank to refinance out of our construction loan (redflag #1 - most refis don't require deposits). Towards the middle of November 2009 it became clear our contractor wasn't going to finish on schedule due to a window placement issue. No big deal (to some degree); we canceled our refi and the bank said they were going to hold the deposit until we initiated the refi process again (redflag #2); who was I to argue. Admittedly, I wasn't super excited about this 'requirement' for them to keep our deposit, but at that point I had not reason to think things wouldn't work out down the road.

Fast forward 3 months. Towards the end of February, when the contractor finished the family room addition, I contacted Stellar One again to initiate the refinance. The original loan officer, who structured the construction loan and subsequent refinance was "no longer with the company" (we have heard through various channels: "fired"; redflag #3). A new loan officer had been assigned to the refi. And without going into all the bloody details over the subsequent six months we were strung with promise after promise to close the loan. Each time they didn't close it they refused to return our deposit because, so they said, they should be able to close it through some other loan process (redflag #4). By contract, we were required to refinance out of our construction loan one year after we started construction; i.e. by 9/1/10. However "new mortgage regulations", a lack of understanding of our file by subsequent loan officers (we had three new officers over 6 months), and, we later learned, some very incorrect dealings by the original loan officer resulted in us going nowhere by September.

The front of the house from another angle

Finally by mid-September I demanded (against the advice of my lawyer) that Stellar One return my original (and on their part bogus), several thousand dollar deposit so that I could pursue a refinance through another lender. Apparently the demand--directed to Stellar One's director of retail mortgage--was enough to cause them to finally return the deposit.

Throughout the course of the drama I nervously watched rates and prayed the local real estate market held firm long enough for our re-appraisal to stay high. If rates rose dramatically, especially as I expected after the end of the Fed's purchase of mortgage backed securities in March, we may not have been able to afford the new payments. If the local marked tanked, our appraisal may have came in with us showing less than 20% equity even though our original down payment and cash put into renovations put us well over that figure. Fortunately rates fell over those 6 months, netting us hundreds of dollars per month of interest savings. Had we refi'd back last fall, our rate would have been over a full point higher than where we are at today. And our final appraisal came in much higher than we expected, thanks to a slow but price-stable local market. Thus, the 'happy ending' yesterday at the lawyers office where Emili and I signed the paperwork for our permanent loan. Now if only we could get all the painting done...

Em and I out front of the homestead after trashing her wedding 

dress. More fun photos at: http://tinyurl.com/2010trashdress