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Can we refinance yet? Help.

Posted by mary11 (My Page) on
Mon, Apr 27, 09 at 21:31

Here is the situation: We are a married couple with one son who bought our crappy tract house in East Bay San Fran approx 5 years ago at the all-time high for $850K (moving due to tech company buy out and subsequent layoffs from Baltimore MD) purchased with interest-only loan. Put $200K down w/ $650K mortgage. House has now been recently tax assessed at $632K. Bummer? Yes. But can we now renegotiate the loan before the balloon hits next year to a regular fixed 30 year? We have no debt save for a car payment ($339/mo). Excellent credit. Never have taken out any home equity loans, this is the fourth house we've owned and we are now 50. Salary (two professionals working three jobs) was approx. $169K last year. Any advice is appreciated.


Follow-Up Postings:

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RE: Can we refinance yet? Help.

Tax assessments are NOT the same as appraisals, in fact in most cases they bear very little relation to the actual real market value of your home. I don't see why you can't refinance now if you have enough equity in your home.


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RE: Can we refinance yet? Help.

Hi Mary,
Your answer; *Probably*

It will depend on;
A) the appraised value,
(and if the appraisal is less than required for a regular refi,)
B) who now owns the NOTE from your current mortgage.

I'd definitely recommend shopping an experienced pro to help you on this (rather than trying to shop it on a DIY basis.)

Luck!
Dave Donhoff
Leverage Planner


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RE: Can we refinance yet? Help.

How will she be able to refinance? San Francisco has been hit almost as bad as OC has as far as plummeting prices. If she has an interest-only loan, then she (probably) hasn't been paying any principle, so her loan is still worth $650k, but her house is going to appraise for much less than that (prices in San Fran have dropped something like 40% over the last 5 months. I wouldn't be surprised if her house appraises under $600k.) If she's underwater, how can she refinance? (I ask, because we're in the exact same boat, and we can't refinance).

None of the help the homeowner crap applies to us, because a) we're too far underwater (you have to be within 5% for the "Home Affordable Refinancing"), and your mortgage has to be owned by Fannie Mae/Freddie Mac...i.e., conforming, which doesn't apply to those of us in California (for the "Home Affordable Modification").

So what are your options then, if you're underwater, have an interest-loan, are facing a balloon payments in your near future, and don't fit under either of the above programs? Begging? Intentionally missing a few payments to scare the mortgage lender into wanting to help you? None of the mortgage people we've spoken to have been any help.


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RE: Can we refinance yet? Help.

Hi Rivkadr,
Even if you're not fitting into any of the "clean & simple" govie-provided programs, many (MOST?) of the lender/servicers are being pressured by the gov't to do loan modifications when a borrower either documents that hardships are pressuring their cashflows, or are in impending ARM programs, or both.

In Mary's case, she has a 'balloon' term loan, which will force virtually certain default, foreclosure and/or shortsale if it isn't modified... so the servicers WILL play.

They just won't play nicely with her directly... they need to hear from a loss mitigation attorney representing her.

Cheers,
Dave Donhoff
Leverage Planner


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RE: Can we refinance yet? Help.

Thanks, Dave -- that's helpful information. My interest-only 5/1 ARM is going to be finishing it's initial period next year, and we're worried that the change in our payments is going to be too much for us (our initial plan when we got the ARM was to refinance at the 3 or 4 year mark. So much for that plan!) Now we're stuck in this mortgage that we can't seem to get out of -- do you think talking to a loss mitigation attorney would help us as well? What exactly does someone like that do, and how do you find one?

Sorry for hijacking your thread a little Mary. But it sounds like we may be in similar boats :(


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RE: Can we refinance yet? Help.

Hi Rivkadr,

do you think talking to a loss mitigation attorney would help us as well?

Very probably, yes.

What exactly does someone like that do, and how do you find one?

They'll start off with a documentation audit, looking for lender disclosure slip-ups to create negotiating leverage from. Then they'll build out your 'hardship package' which basically is a loan app with an upside-down purpose; proving why you must afford LESS payment and costs. Then they go do what attorney's do; try to politely scare the crap out of the other side in order to get what they want for their clients ;~)

I have several available... but they don't like me publishing their access (apparently they want to prove they aren't "soliciting" for clients, and that all clients come in through professional referral... I guess.)

I suppose you could always try to Google for them...

Cheers,
Dave Donhoff
Leverage Planner


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RE: Can we refinance yet? Help.

Well, this is not good news, but we will prevail. I feel your pain, Rakdivr, but it does seem to me that the same slimes that were in the mortgage business and solicting us for our balloons for the last five years, now seem to be in the new business of "saving us". Somehow, we will prevail. Unfortunately, the middle and upper middle class in our neck of the woods who care about their credit will end up taking the brunt of the others who never did, shouldn't have got and don't care now. Good luck to both of us. We will need it.


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RE: Can we refinance yet? Help.

Funny, We are in the same boat except our 5 year fixed will start to adjust rather than balloon. It will be expensive and I'm crabby about it - but I'm not sure what grounds I can use for how to get anyone to modify. We can afford the new payment when it happens next year (we just don't want to!). Our home is way underwater, so I don't see a refinance in the cards.

So far, our plan is to just suck it up and pay the note until the values are up and we can refinance or sell. That said, aside from the loan being adjustable with a 2.75% spread from the 1 year Libor, it's not really a bad loan. Am I missing something?

I have no desire to bring money to a closing so there is no plan to sell. If anything, I would buy a new home and rent this out so I can take the loss in a couple of years.

Should I be more worried than I am? Is there something I'm missing?


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RE: Can we refinance yet? Help.

I hope this isn't hijacking, but figured it's on topic since it's also about refinancing.

We are not under water in our house. We have a 30 year fixed at 5.75%. Not too shabby, eh? The problem is we moved from a $700/mo payment to this home and $1150 payment. Job move for DH, so not a situation where we were trying to move up.

We can afford the payment ~ok~, but of course, a lower payment would help as we don't have anything left to put into savings. We've cut costs, adjusting health insurance plans, got rid of the landline, went to MagicJack, switched net providers for a lower rate ~~ and we're still tight.

Anyway, my mort broker called me the other day and said she could do 4.625% 30 year fixed, .5 origination. Sweet. I said nab it as it woudl bring our payment down to under $1K. Sweet. Well, no because the lender only had a certain number of locks available at that rate adn many other people nabbed them before us.

We want to refi, but the closing costs make it almost prohibitive. We have SOLID credit. Mid 700's, minimal c/c debt which in the past we never carried, but a few ERs and things put us in that position. Nothing too major, but still a pain and uncomfortable for us.

So then, she says she can do a refi with 1.5 points at the same rate. I said too much in closing costs.

The problem I have is people like us who are not under water but could benefit from lower loans which in turn can stimulate the economy can't do anything to refi b/c of prohibitive costs.

ALSO, as of May 1, there is a new federal programme that requires lenders to use a random appraiser. My broker cannot choose her appraiser who knows our area well, instead someone else is sent who may not have ever appraised in this area in the past, which could affect values.

Add to that, we put 20% down, that's all we could afford since we lost half the equity on our Tucson house. No sense in Refinancing if we have to pay PMI. Defeats the purpose.

I'm really ticked that people who bought homes they couldn't afford are getting 2% mortgage rates for 5 years or so to help them stay in their home. Thats' still leaving people like us with a heavier burden and no benefit for their greed and stupidity.


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RE: Can we refinance yet? Help.

Hi Sparksals,

I'm really ticked that people who bought homes they couldn't afford are getting 2% mortgage rates for 5 years or so to help them stay in their home. Thats' still leaving people like us with a heavier burden and no benefit for their greed and stupidity.

Ahhh... but YOU are among the RICH (OBVIOUSLY, since YOU had the CASH to pay 20% down,and were "lucky" enough (unlike the unfortunate and unlucky donwtrodden poor souls) to have purchased your home where you've not become a helpless victim to the real estate market cycles (err, umm... I mean the "desperations caused by a small number of speculators taking advantage of the system."))

Your AMERICAN DUTY (don't think I didn't notice your UN-patriotic spelling of "programme") is to GIVE YOUR MONEY (as one of the wealthy elite) to the unlucky, underprivilieged and (we'll find a way to prove it) discriminated-against OTHERS....

After ALL... "we're all in this together" right?

Signed, Your generous contributor of other people's money,
Uncle Sam


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RE: Can we refinance yet? Help.

Dear 'Uncle Sam',

I think what you just wrote was the definition of responsibility for one's actions and finances. Quite unpatriotic these days, eh?
Ooops, there I go with that un-American stuff, dontchaknow from this Canadian! ;)

Oh, but the mentality these days is the anti-thesis to responsibility. Never mind the 20% we put down used to be over $100K reduced to just over half that from the sale of a home that reduced in value 30% (ish).

Yes, living the American dream right now. Thanks Sammy! You're a swell dude!


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RE: Can we refinance yet? Help.

Well, the argument goes that if we, who didn't overindulge in obscure financial constructions which were pitched by leverage planners, do not support government programs that offer ultra low interest rates for troubled homeowners, the whole economy would suffer even more than it does now.

If we wouldn't have those "evil" government programs that let those irresponsible people stay in their homes, we'd have even lower home values, probably higher interest rates, more layoffs and some of the ones who complain now, especially the ones who are on the edge with leveraged assets that leave them zero savings, might find themselves on the receiving end of accusations of irresponsibility :)

And sorry, if you can still afford your mortgage, we, the _really responsible_ people, who are not indebted to the wazoo, won't subsidize you. This is reserved for emergencies. Otherwise it would be socialism.

I've got zero debt, am in my mid 30s, own my house (and cars) , didn't inherit or win anything and have enough savings to keep me going several years, should I lose my job. So you can't call me irresponsible (you can call me smug). I still am glad that we have a government that doesn't just let thousands of irresponsible families end up on the streets and wreck the economy even more. Because like it or not we are ALL in this TOGETHER.


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RE: Can we refinance yet? Help.

Sparks, Honestly you could refi you just don't want to pay the costs. Banks still have to make money and in order to do that, you have to pay the costs. People who will be using the refi option of HARP will still be paying closing costs. (I will grant that I think some of the title insurance to be bordering on usury when it comes to a simple refi).

I can feel your pain because we are trying to get refinanced as well and the thought of the closing costs is enough to make one vomit but when looking at the life of the loan, it is a small price to pay (we stand to save about $250-300 a month for a home we hope to stay in for the rest of our lives).


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RE: Can we refinance yet? Help.

Hi jrldh,

Well, the argument goes yadda yadda yadda... the whole economy would suffer even more than it does now.

And those who make that argument are ignorant, at best.
A) There were ZERO who "overindulge in obscure financial constructions which were pitched by leverage planners" since leverage planners made no such pitches,
B) the economic cycle is EXPONENTIALLY bigger in scope than the butt-pimple which is the federal attempts at manipulation.

If we wouldn't have those "evil" government programs that let those irresponsible people stay in their homes, we'd have even lower home values,

Ahhh... you mean values returning to fundamentally supported prices... where the common man (and *gasp* young families... even those daring to have one income, with another as a fulltime parent) can actually afford to own a home?

NAHH... can't have THAT! We need to KEEP THE BALLOON INFLATED!!!

probably higher interest rates,

Ahhhh... you mean keeping the contractual agreements made to the fixed-income baby-boomer retirees who pledged their working dollars toward bonds? What a concept!

NAHH... can't have THAT! They were "RICH"... they don't NEED their money.... watch and see... in the end the government will save them anyway, their own personal responsibility was meaningless (they should have known better.)

more layoffs

Ahhh... you mean allowing the corrupt and overgrown behemoth financial institutions to FAIL and go BANKRUPT as has always been the rules-of-the-game for Capitalism? THUS allowing the rich undergrowth of mid-size and small-to-medium companies (the TRUE employment engines of our country) to quickly mop up the mess and regenerate economic growth?

NAAHHHH... can't have THAT! WAYYY too much political contribution money has come from the behemoths... wayyy too much future money to extort from them in return for back-office deals (especially those made in special favor of particular congress-critters... special "custom" loans, paid trips, family featherbed employment deals, etc.)

GOTTA SAVE THE CORPORATE BEHEMOTHS... THAT'S WHAT OUR GOVERNMENT IS FOR!!!

and some of the ones who complain now, especially the ones who are on the edge with leveraged assets that leave them zero savings, might find themselves on the receiving end of accusations of irresponsibility :)

NONE of those who fit your description are complaining... THEY are the ones who are being handed out the candy (paid for by the responsible ones!)

And sorry, if you can still afford your mortgage, we, the _really responsible_ people, who are not indebted to the wazoo, won't subsidize you. This is reserved for emergencies. Otherwise it would be socialism.

I don't think you understand what socialism is, if you think that taxpayer subsidies to corporate welfare and failed speculation is NOT socialism.

I still am glad that we have a government that doesn't just let thousands of irresponsible families end up on the streets and wreck the economy even more.

If you hadn't noticed... there is a GLUT of housing. NOBODY who could afford a mortgage (even an otherwise government-candified subsidized discounted mortgage) would ever "end up on the streets." They would simply move into rental housing which had been purchase, at fundamentally supported prices, by the financially responsible who know how to manage their leverage.

Its pathetic, tragic and sad that we still have people who argue that it is ethical to "contribute charity" with their neighbors' family savings.

Dave


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RE: Can we refinance yet? Help.

"I will grant that I think some of the title insurance to be bordering on usury when it comes to a simple refi"

Try to use the same title insurance company (the same agent helps also) and they usually offer a discount for 'reissue.'


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