Tagged with " refinance"
13 Dec
2011
Posted in: My Ongoing Story, Process
By    Comments Off on 3 Bank of America Refinance Attempts, 3 Dramtically Different Outcomes

3 Bank of America Refinance Attempts, 3 Dramtically Different Outcomes

Three times in the last month, I’ve applied for HARP 2 through my current lender, Bank of America, and received 3 outcomes.

Today I heard that HARP 2 was not available through Bank of America until December 1st, 2011. So, I called back to see if, now that HARP 2 was available, if I would get a more appropriate outcome.

On my third attempt, Bank of America told me that as of December 13 (today’s date), they have not released the HARP 2 program, and that they “do not have a date as to when it was going to show up.”

In all 3 refinance attempts I specified that I wanted to refinance through the new HARP 2 program, and none of the 8 or more people I spoke with mentioned that HARP 2 had not been released. According to the most recent representative I spoke with, each attempt to refinance through Bank of America would have been through the original HARP program. But each attempt yielded dramatically different results.

3 Different Outcomes Breakdown

Here’s the breakdown of the 3 attempts, starting with my current scenario, for reference, all using 30 year fixed as a consistent baseline.

Current 1st Mortgage / 6%

$ 988     Principal
$ 300     Escrow
$1288    Total monthly payment

1st Attempt — Not Approved

Early November, 2011

I was not approved to refinance through the HARP program at Bank of America, my current loan holder.

2nd Attempt — 5.375%

November 21, 2011

1. I qualify for the loan at 5.375, 30 year fixed, but the percentage is not that great, they say, because of my 2nd mortgage.

2. While the appraisal fee of $425 not required, there are still over $3000 in closing costs.

3. It will take approximately 2 years to recoup the refinance costs.

$ 382    1/4 of a discount point
$1175    Bank of America’s total fee
$1567    3rd party fees

$3124    Total closing costs
$  460   Out of pocket cost

$ 856    Principal
$ 264    Escrow
$1120    Total monthly payment

$ 168    Total monthly savings

3rd Attempt — 4.5%

December 13, 2011

1. I qualify for the loan at 4.5%, 30 year fixed.

2. Closing costs are $691 less than the second attempt.

3. It will take 4.6 months to recoup the refinance costs.

Discount points are not mentioned in the conversation.

$191       Discount Points
$866     All lender fees (Bank of America’s total fee)
$1567    3rd party fees

$2433    Total closing costs
$      0    Out of pocket cost

$ 775    Principal
$ 264    Escrow
$1040   Total monthly payment

$ 248    Total monthly savings

Loan Amount Breakdown

$148,484  Current total loan amount
$1,380       Current escrow balance

$153,000  New total loan amount
$1887        New escrow balance

$188          Interest

$4516        Total loan increase

In Conclusion

The third attempt looks like what I should have been offered all along. I’m happy to finally have received a more appropriate interest rate, but am more confused than ever about actually Making Sense of HARP.

2 Dec
2011
Posted in: HARP in the Media, My Ongoing Story, Process
By    Comments Off on NY Times: A New Shot at Mortgage Relief (Making Sense of HARP: Or Is It a Misfire?)

NY Times: A New Shot at Mortgage Relief (Making Sense of HARP: Or Is It a Misfire?)

2 days ago, in an article entitled “A New Shot of Mortgage Relief,” the NY Times reported that interest rates conventional mortgage rates are averaging around 4%. 70% or the 22 million borrowers who are eligible for the HARP refinance program have 5% interest rates or higher.

To recap, my current interest rates are 6% and 8.49% fixed – and Bank of America offered me a HARP refinance at 5.375% with $3000 in closing costs on the 6% loan. If the HARP program is refinancing homeowners who have 5% interest rates, why are they offering me 5.375%, only .625% lower than my current 6% interest rate? (Their explanation was that it was contingent on me having a 2nd mortgage through another lender.)

The NY Times article highlights some critical viewpoints about the HARP and HARP phase 2 revised programs. Among them, Mr. Compton, a public transportation planner and homeowner is quoted in this article with the “…should be a ‘perfect fit for me.'” sentiment.

“It angers me quite a bit,” said Mr. Compton, who added that unlike other borrowers, he never took out a home equity loan during the boom and has consistently paid his bills. The refinancing program, he said, should be “a perfect fit for me.”

It’s a statement that I have been heard to say verbatim on many occasions about the HARP program. If my situation is the typical case study that HARP is using to illustrate it’s action plan, then it’s not doing it’s job.

2 HARP 2 program issues:

  1. The program is not standardized between lenders.

    Lenders are able to created their own sub-criteria for HARP qualification. In other words, they can customize the program to suit their best interest, rather than the best interest of the people the program is designed to aid.

    It’s not enough to tell American’s that this program exists to help people manage their continuous submersion into underwater status. We need to see the number of underwater homeowners who are helped (or not helped) by the program, not just in the NY Times, but in the local media, and the Occupy Wallstreet protests. This has a direct affect on how the American public views people who foreclose. Many still believe that foreclosures can be prevented if people work harder to access programs. In fact, the programs are extraordinarily complicated, narrow in scope and hard to access. And sometimes cost homeowners upwards of thousands of dollars, sometimes with no success.

  2. Standardization on how lenders determine the value of your home without appraisal is ambiguous.

    It’s great that homeowners no longer have to pay $300-$400 for an appraisal every time they attempt to refinance. Unfortunately, lenders have found a way to use this to their advantage.

    Case in point: The Community Neighborhood Housing Agency told me that lenders can look at Zillow.com or your Estimated Tax Value to assess the value of your home in order to determine if you qualify. On Zillow.com, my home is valued at $124,900. My Estimated Tax Value is $40,000. When I was gathering information on HARP refinance through Bank of America, they told me that Fannie Mae valued my home at $178,000 (a price tag I’ve never seen associated with my home since the housing crisis started). When I asked if this would disqualify me for the HARP program (because they might not technically consider me underwater at this value), they said no – you should be fine. But I’m skeptical that after I pay the mandatory $460 cash closing fee (the other $2540 rolls into the loan), that they would take the $460 and not approve me for the final paperwork.

2 Dec
2011
Posted in: HARP in the Media, Process
By    Comments Off on NPR: Shopping Lenders for the Best Mortgage Refinancing Deal

NPR: Shopping Lenders for the Best Mortgage Refinancing Deal

1 Nov
2011
Posted in: My Ongoing Story
By    Comments Off on A Loan Deferred

A Loan Deferred

Losing the ARM

In 2006, the ARM interest rate was going up, up, up, and after several months of waiting it out in hopes of an interest decrease, (and calling my own and other mortgage companies every couple of weeks about possible solutions), I started to consider taking a high fixed rate mortgage. There wasn’t much else to do, it was either get it fixed at a high rate, or watch it continue to go up past 10% in the ARM.

US Bank

US Bank was ready and willing to solve my problems. While the lowest interest rate they could offer me was 8.49%, they boasted that as long as I continued to keep my 2nd mortgage with US Bank, that I could refinance at any time with no closing costs. I asked what the catch was, and they said “No catch. Refinance with US Bank at any time with no closing costs.”

Me: “So when the interest rate drops to 6%, I can walk in to US Bank, and refinance at that rate, no closing costs?”

US Bank: “Yes”

If I prepay the whole loan, or move to another lender, I have to pay a penalty of 1% of the original loan amount with a minimum of $250 and a maximum of $500. But why would I ever want to move my loan to another lender if I could refinance any time with no closing costs? So I refinanced at 8.49%, a 15-year loan for $564/month. The intention was to refinance as soon as rates dropped; they couldn’t stay that high forever.

New total monthly mortgage: $1800
Initial monthly mortgage: $1150

I’ve been paying this $1800 monthly mortgage for 5 years now, and have never missed a payment.

When interest rates finally came down a couple of years ago, I visited US Bank for a refi, confident that I was finally going to get my mortgage back under control. However, now refinance was not an option because I had no equity, due to the crash. My house was worth much less than what I bought it for. Possibly even $40,000 less, give or take $20,000 dependent on the Zillow estimate or various bankers I spoke with.

I realize that this makes perfect sense to a financial institution. Who is going to refinance a loan that does not have sufficient collateral?

I’d like to offer another perspective on this issue.

Do As I Say, Not As I Do

I bought my house for $0 down. I had no collateral and no co-signer, and the banks were more than happy to lend me money when the bubble was getting bigger and thinner. I was a loan risk, but I didn’t know it back then. They encouraged me to dive in and I did. It was my first house and I’d never taken out a loan before. 6 years later, I am making 1/3rd more income than when I bought the house and worked at an ad agency. I’ve had to make this happen through hard work and long hours, mainly just to pay my minimum mortgage requirement after the refi.

  • My house is worth less.
  • I make 1/3rd more income.
  • I’ve never missed a payment.
  • I never had collateral for the initial loans.
  • I never put any money down for the initial loans.

It’s no more of a risk now then it was when they gave me the loan in the first place.

The burden falls to the people who have these high interest rate loans, even though most of us never had collateral in the first place, but were given loans by the banks nonetheless. I’m happy that I was able to purchase the house, and that I was able to make a life to sustain it as best I can as a result of crash of the housing market (in retrospect, only because I was laid off and worked as hard as I could as a freelancer to make ends meet). My concern is that they gave me a loan with no collateral and $0 down, and now I have no collateral and no equity, just like I did back then, the banks screwed up the housing market, and I still can’t refinance so that I can live sustainably.

If I didn’t have equity then, why is it that I am not allowed to refinance because I still don’t have equity, and they are already the owner of the loan and my home? If I don’t have equity, how is it more of a risk for them to refi? I am already a risk, and a higher one if I can’t sustain the $1800 payments indefinitely. It’s not a risk to them at all to refinance the underwater home that they already own. It’s just not as profitable.

I guess that is what the HARP is for, but I’m still not able to access that program to date.

How Much More Can I Give To Thee, O Bank of America and US Bank?

I’ve invested $121,200 total in payments over the last 6 years for a house that I bought for $200,000 and may or may not be worth at least $50,000 less, give or take $20,000.

It’s possible that I could do this for another 5 years (totaling $242,400 in payments), and still have no equity, or just be starting to build equity. That is the thought that woke me up. As busy as I am trying to work hard enough to bring in the amount I have to bring in to make ends meet, I have to start working harder to understand why my mortgage company and my bank won’t help me out of a situation that they are responsible for in the first place. And if I am going to put all of this work into figuring out this program that is supposed to benefit people just like me, I may as well share the journey so that others can be helped along the way too.