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Refinancing -- is this normal these days?

Posted by harriethomeowner (My Page) on
Fri, Aug 19, 11 at 13:08

We bought our house 12 years ago and have had the same lender since then (though it's changed hands and names several times) -- a big national company. We have refinanced twice since then, and decided to do so once more to take advantage of the current low rates. This company was sending us letters offering a "no cost" refi and it seemed like a good deal. We have more than 50% equity in the house and excellent credit, and no other debts.

The original paperwork they sent mentioned a closing date of August 15. Well, obviously that has come and gone, but they haven't approved the loan yet. Every week or so, they call and ask for more information -- some of which I have already given them. This is making us increasingly nervous about their general competence and wondering if we should just bag it and apply for a loan with our credit union instead. We have paid for an appraisal, but other than my time spent sending documents and making phone calls have made no other investment in this refi. (I would hate to lose what we spent on the appraisal if it's not necessary, though.)

WWYD? Thanks.


Follow-Up Postings:

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RE: Refinancing -- is this normal these days?

We need more info. For example, what are the terms of this "no-cost" refinance compared to what you have now? In particular, is this an adjustable rate situation? I'm a little suspicious about this deal.

In addition to posting more info, have you Googled the name of the company that is offering this? If you search on the name of the company, plus the word "refinance" plus the word "scam" it may turn up bad experiences that others are having or have had. If your original company has been taken over, there is no guarantee that you can necessarily rely on the new one as being ethical.

Or, it could all be legitimate. However, you have to ask why they would put you in a situation where they make less profit from you for no cost. I can tell you that I recently looked at refinancing with my current, very reliable, lender. They had deals at lower interest and with negative points, meaning that they would give me some money back. However, there were still other lending fees and the whole thing would have cost me several thousand dollars net...and I would be trading in my existing 15-year mortgage (which had 13 years left) for a new 15-year mortgage. When I did the math of the costs I would have to pay, plus that fact that I would be making lower payments, but for more months, the bottomline was that I would save less than $1000 by bothering to go through all the paperwork of a refinance. I passed on the deal.


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RE: Refinancing -- is this normal these days?

Okay, the new loan will be a 20-year fixed rate at 1.5 points lower (or maybe less, because we supposedly get an opportunity to lower the rate once before we lock it) than our current 30-year fixed rate. There are no points. The total settlement charges (title, title insurance, recording fee, transfer tax, daily interest) are about $2k. (Closing costs with the credit union would be about $3k.) The savings in interest over the life of the loan make up this cost in a short time, plus we will be shortening the loan term by 6 years (b/c we are 4 years into the 30-year).

And yeah, I've resisted the refinance bug until now because when I ran the numbers, it didn't make sense. But this does. I don't know why the lender is selling this deal where they make less money, but apparently they are.

I did google the company and found some complaints, maybe a dozen or so, mostly from people trying to refinance with the government program to prevent foreclosures -- and there are so many problems with that, it's hard to say who is at fault.

It has just been striking how much more complicated and slow this has been than the refinance we did with them 4 years ago, with the same conditions in place (except that then we owed a little more on the house and made a little less money). This is the first time we've had any issues with this company (though, as you say, who knows who's running it now?).


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RE: Refinancing -- is this normal these days?

"I don't know why the lender is selling this deal where they make less money, but apparently they are. "

Because they know that anyone with decent credit and income is going to refinance at these rates. They would rather sign you back up AND charge you a couple grand to do it. They have some guy in accounting who has run the numbers and determined it is better for the bottom line to keep 100% of their business at a slightly lower interest rate (plus some closing fees) than it is to lose 20% of their business to refi's but keep the other 80% at the higher rate.

As for why it takes so long - most big lenders laid off thousands of workers in the downturn.


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RE: Refinancing -- is this normal these days?

The lenders laid off the experienced skilled employees and rehired unskilled temps at very low wages. 8-(


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RE: Refinancing -- is this normal these days?

I'm a little confused. You've had your home for 12 years, but you are only 4 years into a 30 year loan? It is hard to believe that the payments on a 20 year loan will be less than on a 30 year loan. If you get it, great. If not, just pay more on the principal and you can pay it off as quickly as you can afford.


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RE: Refinancing -- is this normal these days?

Too complicated to go into and not really germane to this discussion. But yes, the payments on the 20-year are the same as what we have now.

I don't see why we wouldn't get this loan, since we have excellent credit and no other debts, and we already *have* a loan with them. Just wondering how much longer this is going to take or even if it would be better to disentangle from this big company and take out the loan with our credit union instead.


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RE: Refinancing -- is this normal these days?

Call around and ask other banks what they have to offer? Some will credit you back some of the fees. Even if you decide to go with your current one that is in process you should really look around and compare just so you know what is available.


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RE: Refinancing -- is this normal these days?

Underwriting standards are much stricter than they used to be. And I don't mean stricter than the very loose standards of the housing boom era. I'm talking about much stricter than the very sensible standards of 10 or 20 years ago.

Underwriters are currently petrified by the fear that they're going to approve what turns out to be a bad mortgage. So, they approach each application with fear and trepidation, desperately searching for any molehill, no matter how trivial, that can be turned into a mountain. When they find one, they'll latch onto it, demanding more and more documents from the poor applicant in the hope that a bulging document file will be enough to cover their ass if anything bad happens.

So, Harriet, I think your refinance is proceeding in the "new normal" fashion for the mortgage industry. They may or may not get tired of hounding you for more pieces of paper and actually (gasp) close your deal. I certainly hope so for your sake but I wouldn't hold my breath.

Oh, and that reminds me, I need to call my mortgage guy and find out what's going on with what I thought would be our pretty routine refinance, now starting it's seventh week of life.


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RE: Refinancing -- is this normal these days?

Yay! We got approved and will close this week. Not that it's going to be that exciting for us right away -- our payments will be the same. But we'll save a bunch of money over the long run.


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RE: Refinancing -- is this normal these days?

What bank is this that you applied on Friday and by Monday a closing is scheduled?

How much money did you have to wire before closing?


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RE: Refinancing -- is this normal these days?

We applied in July. It took about 6 weeks to get to this point. It's the same lender we have been dealing with for 12 years, same house.

The only money we are out right now is for the appraisal.

I'm still a bit ticked because originally they said we could lower the rate once before closing, but now they are saying yes, you can lower it but you'll have to pay points. Grrr. I'm going to go back and read through all the paperwork again before we sign anything.


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RE: Refinancing -- is this normal these days?

"I'm still a bit ticked because originally they said we could lower the rate once before closing"

I'm sure they said no such thing. They said something more like "If mortgage rates drop between now and x date, you will have a 1 time chance to lock in at the new rate." If their rates don't drop, you don't automatically just get to lower your rate.


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RE: Refinancing -- is this normal these days?

Average rates have dropped between now and six weeks ago by about a quarter point. That may be considered too small a drop to justifiy lowering yours.

But anyway, good on you!

Ours is still pending. The latest is they're getting a second opinion review of the appraisal, even though it came in about 10% higher than it needed to be to meet the 80% loan to value ratio.

It's interesting to note that over 27% of refinance applications were turned down in 2010 and the rate keeps climbing. Keep that in mind if you're hoping to refinance at today's very low rates. Even if you have good credit, a steady job, sufficient income, no other debt, and more than enough equity in your house, you still may have trouble.


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RE: Refinancing -- is this normal these days?

The rates dropped, but yeah, only by a quarter point, and that's exactly what they said (not worth lowering -- not worth it for them!). Ah, well, it's all set up now. Looks like we're good to go.


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RE: Refinancing -- is this normal these days?

"Average" rates have dropped, but that doesn't mean that particular lenders rates have dropped. Read the paperwork. It certainly has a formula for rate calculation and whether you qualify for a change. If you really are entitled to a lower rate, fight for it. It is well worth delaying another week to save money for the next 20 years.


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RE: Refinancing -- is this normal these days?

Not sure how I'd go about fighting for it. I did read the paperwork, but I didn't see a formula in there. They're selling, I'm buying, is the bottom line, right?


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RE: Refinancing -- is this normal these days?

It isn't like they are the only ones selling though.

If you had the option to lock in a rate at a later date, there is certainly language about how that is to happen. If there isn't, you never had the option. If there is and you qualify, then fight for it. If the first person says no, go up the chain. Everyone has a boss.


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RE: Refinancing -- is this normal these days?

Just canceled this. They were being very obfuscatory and not helpful (and almost abusive), and though I hate to have to start over (and eat what we spent on the appraisal), and though it will cost more upfront, we can get a better deal through our credit union -- plus, I really trust the credit union because they've been great to work with in the past and completely straighforward. So onward ...

I'm posting this in case it might be helpful to anyone else out there, so take it fwiw. My take-away: big, commercial bank is not your friend.


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RE: Refinancing -- is this normal these days?

Harriet-- Good for you! If you don't like it,don't do it. Those of us with equity and good credit can write our own ticket to a certain degree these days. *You* paid for the appraisal, so it is your report--make sure you have a copy of the entire report. Another lender should be able to use it within the next couple of months if you pursue refi.

That said, my credit union happily lowered the rate on mine (to their current published rate) after the disclosure since there were no additional fees. 3.80 for a 15 yr mortgage with no points. Geez. Keep shopping and I'll bet you can find another loan. Explore local credit unions, perhaps. Worth moving your banking to a CU if they'll give you a good rate. My CU met B of A's refi closing costs (my current lender) with a better rate. My credit union has about 8 employees and a single office, so the members all know the CEO on a 1st name basis.


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RE: Refinancing -- is this normal these days?

Yes, I'm hoping the CU will work out. It's sort of a medium-sized organization with a number of offices, but local. My mother, sisters, and I have all done business with them over many years without any problems. At this point, I don't care if we have to pay more! The last guy I talked to at the mortgage company was getting really nasty by the end of the conversation -- I don't want to have to deal with any of those people again. They just lost a customer.


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Approved

The CU approved our loan and locked our rate at almost a point lower than what the mortgage company was offering and 2 and a quarter points lower than our current loan, 20 years, fixed rate. We do not have to pay points on this. We do have to pay closing costs, but after the experience I just had dealing with the big company (it was really upsetting!) I feel it's worth it -- and we will still save a lot in the long run. It took about an hour from start to finish (from when I started the application to the close of my conversation with the rep). Of course, we need to send documentation, but I'm sure it won't be a problem.


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RE: Refinancing -- is this normal these days?

The credit union didn't really "approve" your loan because it has to go through underwriting before it can be cleared to close. Hopefully, that will go smoothly for you and not take too long but the fact is that there has been a rush of refinance apps in the last few weeks. This may slow things down for you.

You may not be able to use your old appraisal since, I assume, it was done over 30 days ago. And most lenders have a policy of using existing appraisals only if the appraiser is part of their pool of approved appraisers. Even if the CU agrees to accept it, your former lender will have to agree to sign off on it.


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RE: Refinancing -- is this normal these days?

Just found out we're closing on our refi at 7 PM, seven weeks and one day after applling.

This is our THIRD refi attempt in 10 months. We have excellent credit scores, ample income and enough assets to pay off the mortgage many times over. First turn down due to low appraisal by incompetant appraiser. Second to living on a private road with no recorded road mainentance agreement in place. Third hit snags because we own multiple homes (subject property is our primary residence, though nobody believes it), and house is on waterfront, rural land.


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RE: Refinancing -- is this normal these days?

feedingfrenzy, I hope your refi goes well.

I guess what they approved was our credit. Anyway, I don't anticipate problems, though you never know.

They are going to do another appraisal, which is just as well. The previous one was some sort of budget, drive-by deal (for which we vastly overpaid).


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RE: Refinancing -- is this normal these days?

Yesterday's closing was cancelled because the interest rate on the closing papers was incorrect. However the papers were redone and we closed at 10:30 AM today, the same day our second rate lock would have run out.


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RE: Refinancing -- is this normal these days?

Congrats!

Ours is moving along -- paperwork sent, appraisal scheduled. Here's hoping it works out.


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Done!

We sealed the deal with the credit union yesterday: 20 years, fixed rate, 3.8%, ~$2k closing costs.

Also, they offer a biweekly payment plan at no extra charge, so we are going to do that.

I was especially happy we made this switch after I called the old mortgage holder and I had to spend 30 minutes on the phone on hold, waiting to talk to a human being, just to get the electronic fund transfer canceled.


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RE: Refinancing -- is this normal these days?

GREAT!!!

Congratulations!


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RE: Refinancing -- is this normal these days?

Nice rate. Very happy for you.


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