Considering Refinancing Your Mortgage - Be Aware New Problems Now Exist
Posted Mar 12, 2008 @ 9:56 pm, Viewed by 1668 Visitors, Read 1689 Times.Lots of folks are considering refinancing their current home loans in this falling interest rate environment. The problem is things have changed within the lending industry since many borrowers got their original mortgage or refinanced the last time rates fell. What used to be a simple process has now turned into a journey filled with many roadblocks. The fallout from the subprime mess has brought about all sorts of changes including new FICO score requirements, declining market penalties and the loss of many types of available loan programs. It almost seems like for everything the industry or the government has tried to do to improve things, more new changes occur that set the process back even further.
The latest problem revolves around those individuals who took out a second mortgage. Many second mortgage lien holders are now refusing to subordinate their secondary positions on the new refinanced loan. For years such requests have been routine as the second mortgage lien holder remained in the secondary position just like it was on the old loan. For whatever the reason, things have changed.
Upon review, there does not appear to be any reasonable explanation as to why some lenders are making these blanket decisions to refuse subordination, especially if the borrower has good credit, a solid appraisal and enough equity to cover both the first and second mortgage in the new loan. If there is a question of a declining market value, an individual denial would make sense, but across the board refusals seems counterproductive. Especially, if by refusing the subordination, it blocks a refinance that could push a borrower into a foreclosure situation because of an upcoming loan reset.
So, before you jump into refinancing your mortgage, be sure to cover all the bases with your new lender. Make sure they are aware of your situation upfront, including any second mortgages you may have. Then be prepared for any possible contingency. Being aware of potential problems before they arise could save you lots of headaches in the long run.
Metro Mortgage Company is a federally regulated Mortgage Banker specializing in Conventional, Jumbo and FHA/VA mortgage loans throughout Florida.
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Sorry to hear that Dave. I'm sure it is happening all over the country though.
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Gulf Coast Associates is a private real estate firm specializing in SW Florida Real Estate. Benjamin Dona is the Broker-Owner. He and his wife Terry, an underwriter with 20 years experience, also own a federally-regulated mortgage banking firm, Metro Mortgage Company.
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Good one. There have been all kinds of new pitfalls in underwriting as a result of this fall out. The joke going around our area is "take a solid appraisal and cut it by $20K." I am three for three, this week alone on that mantra. Point is, even solid borrowers are going to experience problems--which I think echos the sentiment of your post.