Comments on: 7 Lessons Learned from a Failed Attempt to Refinance a Mortgage

By: DR

DR — Sat, 10 Oct 2009 12:09:50 +0000

Virginia, you are absolutely right about appraisals. And as an owner of several investment properties, the different LTV requirements have effectively prevented us from refinancing, too. And I’m guessing that we are looking at 3rd quarter of next year at the earliest before the situation begins to improve. The recession may well be over, but employment won’t begin to improve for at least several quarters.

By: virginia

virginia — Sat, 10 Oct 2009 12:04:20 +0000

This summer I chatted with 2 local mortgage brokers (and the existing lender, a big Bad Bank) about refi for an investment property (an entire other kettle of fish, with loan to value ratios now max 70% – so just using any of those home equity lines they hounded me to take when i financed the property in feb 08 puts me immediately over the LTV. They don’t raise the interest rate on the home equity to ‘signal’ to you to not use it – it’s still 2.5% – but if you touch it, you get burned.

The big issue is APPRAISALS: with the new regs that came in this summer stating that the lender, not the broker, must select the appraiser, the appraisals are being done by ‘armchair appraisers’ in distant markets with no local knowledge. And, they have every incentive to use nothing but foreclosures and short sales as comps. In our part of VA where one zip code straddles 2 MLS areas, 3 counties and 1 municipality, one broker told me of a couple with credit score over 800 denied a loan because the very well priced house’s appraisal came in even lower – the appraiser was out of state and used only foreclosures in the lowest priced county, not in the municipality where the house – and true comps – were.

Until the ‘rat’ of foreclosures moves through the market python, and speculators, investors and owner-occupiers start to be able to flip them for a little more $, AND we get back to LOCAL appraisals, this will continue to be a problem. People have to speak up to let legislators know that in an effort to more effectively regulate appraisals they have actually made the problem worse. Try to find a lender that is truly LOCAL who will hire an appraiser who will actually VISIT THE HOUSE and pull ACCURATE COMPARABLES. Don’t forget about credit unions and Farm Credit. Ask if they are actually the lender, how long they will hold the note before they repackage and sell it, and whether they are hiring the appraiser locally.

By: Manshu

Manshu — Sat, 10 Oct 2009 00:47:25 +0000

That’s a great account of how you faced this situation yourself. Like David said, this is a very useful post for someone going through the same experience.

By: David Weliver

David Weliver — Fri, 09 Oct 2009 19:02:57 +0000

Great first-hand experience…I haven’t written much about refinancing as I’ve never done one (and wouldn’t be able to offer people much advice), so I’ll definitely point people with refinance questions here!

By: Ron Woods

Ron Woods — Fri, 09 Oct 2009 18:35:08 +0000

You can very easily get the lower mortgage rate, by simply adding $100 to
$150 per month on your payments. The extra payment is 100% applied
to your principal, which effectively lowers your interest; and pay back period!

Also, you do not have appraisal and bank fees to worry about wiith the extra
payment program. You can also have a 13 month yearly payment squeezed
into the 12 month payment cycle, to effectively get a lower interst rate.

By: Jesse

Jesse — Fri, 09 Oct 2009 16:15:07 +0000

I just finished a refinance that took almost six months to complete due to things out of our control (broker disappeared for a few months, computer problems, etc) and I think you are dead on with #4 here.

We use some self appraisel and online appraisal sites to keep an estimate in mind of what the house is worth, and our appraisal was no where near the number we thought. It was pretty disappointing but we did end up getting it done.

By: Matt Jabs

Matt Jabs — Fri, 09 Oct 2009 14:12:36 +0000

Great info DR.

I am currently upside down on my home and am pretty upset that I let myself get into this sitch. We purchased 2.5 years ago for 165K, have a 1st & 2nd mortgage, but now our home value is below what we owe. Wife & I both want to sell but are afraid it is impossible to do w/o a loss.

We may take that loss and get out before the entire economy crashes and values plummet further and further.