Forcing a lender to lower interest rates without refi?

parma42March 17, 2009

I apologize, in advance, if this sounds incredibly stupid.

Because of a promotion, we had to move closer to my husband's work and built at just the wrong time (moved in November 2007). Costs are much higher here than where we had lived previously and our promised raise and bonus fell victim to a company wide wage freeze.

Our new build cost $445,000. We have a 20 year, 6.375 interest rate and put 20% down. I was afraid the house wouldn't appraise out and asked my daughter to nose around as she used to be a head processor for a brokerage firm.

She got back to me and said that it would appraise for around $385,000. She also said that the owner of a loan company told her that there's a law (and this is where it gets stupid) saying that you can go to your mortgage company and demand they lower your rate if you can show your home has lost a lot of its value. He said he did it with Countrywide, (our lender, also). He also said that they will try to do something else but if you stick to your guns, they have to lower it.

Urban legend?

Was almost too embarrassed to even write this but if it saves me the humiliation of my husband being thrown out of Countrywide's office when he demands this adjustment, well...

Thanks

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joyfulguy

In that I lve in a different country and have no suggestion at all to offer regarding the bind that you're in, I almost passed by.

But I felt that I should let you know that when I read your message I felt real concern about your problem, and of the stress that it must be putting you in.

Now that I'm giving some more thought to your message, I'm thinking that I was some concerned when I read your subject line about the word, "Forcing". Maybe that's what you'll need to do, but I am wondering whether a concept such as "Pressuring" would be more relevant in the situation.

Sometimes approaching a financial institution in a harsh or belligerent manner leads them to be minimally interested in helping one, but a lucid but quiet expression of one's problem, with a positive attitude, being courteous, but rather firm, may bring better results.

It's a bit hard to bulldoze financial institutions - witness the guys that ran IAG into the ground figuring that, after borrowing/getting a gift/bailout of about 150 billion from the gov't., the perpetrators of the debacle figured that they were contractually entitled to a "bonus" of about 1/10th of 1% of it?? (Better they be on the street!!).

ole joyful

    Bookmark   March 17, 2009 at 7:49PM
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harriethomeowner

It sounds like you might qualify under the new loan modification program that the federal government just started.

Maybe this will help (see link).

Here is a link that might be useful: FDIC consumer guide

    Bookmark   March 17, 2009 at 9:15PM
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dave_donhoff

Hi Parma,

She also said that the owner of a loan company told her that there's a law (and this is where it gets stupid) saying that you can go to your mortgage company and demand they lower your rate if you can show your home has lost a lot of its value. He said he did it with Countrywide, (our lender, also). He also said that they will try to do something else but if you stick to your guns, they have to lower it.
Urban legend?

Either urban legend, or a broker full of beans!

*IF* your loan was sold to Freddie of Fannie, you *MAY* benefit from the upcoming Homeowner Affordability Modification Plan (HAMP) or Homeowner Affordability & Stability Plan (HASP - refinances.)

More details here (go to my SECOND post inthis thread for good links);
http://ths.gardenweb.com/forums/load/realestate/msg0314583220481.html?3
Homeowner Affordability and Stability Plan

The industry is awaiting clarifying details from the Fed... due either April 1st, or (more likely) May 1st, at the earliest (depending on who's rumours are to be believed.)

Anything already accomplished (i.e. with Countrywide or other lenders) was an open market Loan Modification negotiated prior to Obama beginning to tease us about the issuance of federal guidelines. Once the trickle-out of fed guidelines, pretty much most (or all?) of the servicing companies have frozen all negotiations while we wait for them to discover if they'll get more sugar by awaiting the government plans.

Luck!
Dave Donhoff
Leverage Planner

Here is a link that might be useful: Homeowner Affordability and Stability Plan

    Bookmark   March 17, 2009 at 9:41PM
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Chemocurl zn5b/6a Indiana

Taken from the link below.

The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today's lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

Here is a link that might be useful: Relief for Responsible Homeowners:

    Bookmark   March 17, 2009 at 10:13PM
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parma42

Thank you all for your responses!

I am a regular on the Home Dec side of GW but lurk here, from time to time. Not too much left for decorating, anyway.

I read through all of the links. The "Relief for Responsible Homeowners" was sounding promising until I got to a section that implied it wasn't really interested in those who are *too* responsible.

It had a line saying you couldn't have enough "liquid assets" to pay your mortgage. Well, we have emergency savings like responsible people should. We pay off credit card balances monthly and have no revolving debt. We've tried to do everything by the book. Our 401k (what's left of it) is alloted the legal maximum, yearly.

There is an article in this month's Kiplinger's that is advising those, who have the income to spare, to start spending a bit to help the economy. Well, we used to be those people. The recession caused the drop in our income and the housing fiasco, the drop in our home's value.

From the sound of it, our only recourse will be to spend down our savings and have no income, left, to spur the economy.

A lower interest rate would have really helped us.

Thanks again.

    Bookmark   March 18, 2009 at 10:44AM
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tlbb

Hi parma. Don't be embarrassed to ask, it's a great question. We bought new constuction in 2002 (just before real estate skyrocketed). In 2005 (I think) mortgage rates dropped drastically. Our lender modified our loan WITHOUT refinancing. They lowered our rate from 6.75 to 5.5 with no paperwork, no fees, etc.

Maybe you could talk to your lender. It doesn't hurt to ask.

tlbb

    Bookmark   March 18, 2009 at 1:10PM
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harriethomeowner

I do think you should ask your lender about it.

From what I understand, if you have a Fannie or Freddie loan you might be eligible for the refinance part of the program. To find out, you need to call your lender. The other part of the program is for people who are delinquent on their mortgages, which it sounds like you are not. These are two different things.

Some info here:

http://www.washingtonpost.com/wp-srv/business/foreclosureprevention/?hpid=topnews

Here:

http://voices.washingtonpost.com/local-address/2009/03/sharpen_your_elbows_if_you_wan.html

And here:

http://www.washingtonpost.com/wp-dyn/content/discussion/2009/03/03/DI2009030301614.html

HTH -- good luck.

    Bookmark   March 18, 2009 at 4:54PM
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gonativegal

Parma,

We did get a rate adjustment with our mortgage company, TCF in Jan. Although, to be honest, they didn't really want to do it. I had to esculate it to a regional vice president and I still didn't get a great rate - but I did contact Dave Danhoff, and he said they are not obligated to give you anything and to take what they offered (which was about a percent and a half lower) before they change their minds. I was also advised by the bank to keep working on DH's credit report which had some mistakes on it with the idea that we could in 6 months time lower the rate again if his score was higher.

Although, in our case, I used the argument that were paying a rather high rate to begin with - 9.25 fixed and yet had never been late on a payment - we were able to get it shaved down to 7.84 - not great but we still walked away paying a hundred less on our a mortgage - it cost us $350 for the rate adjustment as opposed to a much higher refi fee of several thousand.

It was a very emotional time for us - I almost had to take a couple of weeks and just think about their offer rather then going into the bank and blowing my stack. As one poster above suggests, you're already an existing customer and therefore really have no incentive to offer you anything.

My advice is keep your cool but be persistent.

    Bookmark   March 18, 2009 at 6:16PM
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jane__ny

I have a Home Equity with Wells Fargo and they lowered mine over the phone without any paperwork. I was shocked. I called them regarding another matter and got chatty with the girl and asked if I couldn't have the low interest rates. She checked my credit score and said she could lower it. She did and my monthly amount dropped considerably.

    Bookmark   March 19, 2009 at 12:25AM
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parma42

Thanks for all the further responses.

After reading Harriethomeowner's excellent link about the refinance, we got our hopes back up, a bit, but when we called, they said that neither Freddie nor Fannie were involved with our loan.

Guess we can just try to ask if there's anything they'd be willing to do.

Thanks again.

    Bookmark   March 20, 2009 at 2:54PM
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parma42

Just posting an update for all of you who have been so helpful.

After doing a little more digging and talking to others in the loan business, we decided to call Countrywide/BOA again. This time, we were told that our loan was indeed Freddie Mac. Either the first person was clueless or didn't want to bother with what would ensue.

We've got a little bit of hope now.

Thanks again.

    Bookmark   March 25, 2009 at 9:57AM
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