Should we short refi to pay off our mortgage servicer?

Asked by Ibowl4food, Woodstock, IL Thu Jun 24, 2010

Our mortgage is 212k and the value is approx. $140k. We are paying 7.25% interest with LPMI that was snuck in without us knowing it when we refi'd 3 years ago. I haven't spoken with our lender yet, but they are only a mortgage servicer so they do not refinance. I need some help finding a lender who will work with us. We have been current with our mortgage payments. No late payments whatsoever. We also are having no trouble paying the mortgage (no hardships) so we don't qualify for many programs. Please let me know what your opinion is. Should we short refi, short sale, foreclose, etc.? We can't see the reason to keep paying at such a high interest rate when we have so much negative equity.
Thanks.
Tracy

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Hopewishprayer’s answer
Hopewishpray…, Home Owner, California
Tue May 10, 2011
I was told I had an LPMI by my old mortgage servicer B of A, and therefore ineligible for a HARP Refi. I went to a wholesale lender (http://www.totalmortgage.com) and they looked up my Fannie Mae loan. Guess what? NO LPMI! I applied under DU Refi Plus (HARP Program for Fannie Mae Loans) and just closed yesterday. It only took a month, 30 yr fixed @ 4.9% no points, no PMI or LPMI. Shop around with several direct lenders, their mortgage brokers will tell you right away if your loan truly has an LPMI. Don't just take your mortgage servicer's word, do your homework. Good Luck!
0 votes
Michael Cline, , Chicago, IL
Mon Jun 28, 2010
Unfortunately there are many other people in similar situations. If you plan on living in the home for a while then keep paying the mortgage. Who cares about negative equity if you're not planning on moving anytime soon!
Look at it this way... you loose value the second you drive a new car off the dealer lot, right? But you want the car so you still continue to pay the loan. Do the same with your home. Paying a higher rate sucks, but sometimes you just have to deal with it. Good luck!

Michael Cline
mcline@peopleshomeequity.com
0 votes
Ibowl4food, Home Owner, Woodstock, IL
Sun Jun 27, 2010
Yes, I read your post Keane. My response was mostly to Jim. The LPMI has been a trouble spot for us. No one wants to take that on if you aren't currently a customer of theirs. Right now it seems like we're in the in-between stage where no one can help us. I will continue to research and look at the links you provided in more detail.

Thanks.
0 votes
, ,
Fri Jun 25, 2010
lbowl4food,

Did you read my post? The government IS helping people refinance who have paid on time. HARP is made specifically for this. So is the new FHA short-payoff program.

I don't know if the LPMI will keep you from trying this refinance, but the government DOES want consumers to be able to refinance to a lower rate if they've been paying on time.
0 votes
Ibowl4food, Home Owner, Woodstock, IL
Fri Jun 25, 2010
Thanks for your input everyone. Unfortunately the point that we are trying to make is that we are paying interest at 7.25%. That is absolutely ridiculous! As everyone knows, the interest rates are now under 5% last I heard. If the bank would just lower our interest rate we wouldn't be throwing such a fit, but because the government is helping out everyone who has not been paying then we might as well jump on the bandwagon. If they lowered the rate we might actually be able to put a good chunk of money towards the principal, but as it stands right now we can't see paying anything extra because of how much negative equity we have. We'd just be throwing money away...
0 votes
Jim Starwalt, Agent, Grayslake, IL
Fri Jun 25, 2010
Tracy,

Sorry to say it, but your homes value and the papers you signed on your refi are not hardships and are not the banks fault. You made an agreement to pay x amount if they would loan you the money, you agreed to this and the terms. So your homes values have plummeted, that is your burden to deal with, not stick it to the bank.

I understand that you feel wronged because of the PMI but you should have had the papers looked over by an attorney before you signed them.

You stated you can pay, you have been paying, so do the right thing, stay and pay.
0 votes
, ,
Thu Jun 24, 2010
The government is incentivizing lenders to take short-payoffs on refi's but I believe your LPMI may be a huge hurdle. Keep your head up and keep us updated.

Here is some info on the announcement on FHA financing on short payoffs. Scroll to the bottom of the blog post:

http://www.keaneloans.com/2009/12/18/homeowners-guide-to-harp/

We haven't even figured out how to do HARP loans with PMI and LPMI. Doing a short payoff with PMI could be a hurdle but I would give it a shot.

The PMI company will be the ultimate decision maker on a short sale too, but that's more common of a situation.

The wait period to buy after a short sale and foreclosure is 3 years for FHA
http://www.keaneloans.com/2009/12/22/how-long-do-i-have-to-w…

If you bought after the short sale and didn't have lates, you may not have to wait 3 years but you have to show you didn't do the short sale for a profit, so you would likely have to buy for less than what your other home was sold for.

If you do have lates, be sure to build your credit as soon as the shortsale or foreclosure is done. This way you can qualify as soon as you hit 3 years. I would also study what government 1st time home buyer programs are available in Illinois. Most programs define a 1st time buyer as someone who hasn't owned a home in 3 years. Coincidentally, in WA state, every person who goes through foreclosure or a short sale with late payments can not only qualify after 3 years, they have government assisted programs to help cover down payments or tax credit programs. If you go down that path, here's some tips on rebuilding your credit after a short sale or foreclosure:

http://www.keaneloans.com/2010/05/13/how-do-i-fix-my-credit-…

Good luck!
0 votes
Carl Henker, , 95928
Thu Jun 24, 2010
You may find that the approval from your lender for a short sale and short refinance will also be based on your assets and ability to pay, if your current payment is not a hardship those options may not be available. Your first conversation needs to be with your current lender to see what they will require to approve the Short Sale or Short Refinance.
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