Refinancing mortgage info?

Discussion in 'Off-topic' started by Malum Prohibitum, Nov 3, 2010.

  1. Malum Prohibitum

    Malum Prohibitum Moderator Staff Member

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    Assume a first mortgage (a couple percentage points higher than today's historic low rates) and a second mortgage (HELOC). The first mortgage is way under 80% of the appraised value, which is good to go for refinancing, but due to values plummeting like a rock, the first and the HELOC together now add up to more than the home's value.

    Can one refinance the first mortgage alone, without touching the HELOC?

    It seems the answer is no, but I do not see what the big deal is if the HELOC holder will subordinate (which they have done previously).

    It seems a lot of people are in a similar situation, so is there any solution to this issue? Any thoughts, suggestions, or advice?
     
  2. martin_j001

    martin_j001 Active Member

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    I apologize I can't add anything to your exact scenario, but I'm in a kind of similar boat and SOL... Our tax assessment dropped our homes value from $178k to $135k from 2009 to 2010. Being "underwater" and having a loan through a bank that is not owned by Fannie Mae or Freddie Mac, we can do nothing in terms of refinancing (our 30 year fixed rate isn't particularly bad, but we could save a decent amount by refinancing to todays rates). At this point, I'd have to go into foreclosure proceedings before anyone would talk to me about refinanicing. Great how that worked out for us all, huh? :screwy:
     

  3. Malum Prohibitum

    Malum Prohibitum Moderator Staff Member

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    Since your home is valued at $135k, assume your first is only $90k. Refinancing should be easy? But what if you also have a HELOC at another $85k, which was fine when your home was worth more, but now means the two loans together are more than your home is worth?

    That is the situation with which I am faced, although I adjusted the numbers some to meet the numbers you posted.

    One still ought to be able to refinance the first mortgage. If the holder of the second will subordinate, then the first is no worse off and has plenty of equity.

    I did refinance once before, but the home's value was a lot higher, and the second subordinated to the first - no issues. The situation for some reason becomes different when the value of the home drops belowthe amount of two loans added together. Why? The first is no worse off. The second should not care about subordinating. They are no worse off - the home is already underwater even if they refuse to subordinate - it stays underwater whether they subordinate or not or whether the home is refinanced or not. In fact, the only change will be lower payments on the first, which would make the homeowner less likely to default on the second, I should think. I just do not get what is going on here.
     
  4. XshootX

    XshootX New Member

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    MP, a friend of mine is a mortgage broker and had some interesting news last night. It may not apply to you, but I'll be happy to put you guys in touch if you'd like or forward your question to him. If I heard him right, a loan owned by Freddie or Fannie can be refinanced even if it's under water, as long as the homeowner has never had PMI on the loan (meaning they originally put down 20%) and the house isn't currently on the market. This allows people in a house worth $180k to refinance their $200k loan at today's lower rates and not have to put up the cash needed to get to 80% LTV.

    I found that ridiculous, but it appears that lenders have adjusted to the new reality along with homeowners. I suspect your HELOC was not subject to PMI as your first was 80% LTV or less at the original closing, so the intent of the above would apply to you as well.
     
  5. Mafuta54

    Mafuta54 Active Member

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    Not true!

    I just did a streamline refi on my house for the fourth time. No appraisal, no qualifying, and basically very few questions asked.
     
  6. XshootX

    XshootX New Member

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    What's not true?
     
  7. XshootX

    XshootX New Member

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    Just got a response. According to my friend, MP's scenario would possibly qualify for refinance, even if the combined 1st and HELOC were more than the current value with the caveat that the HELOC must've been used to purchase the property. If the HELOC was taken out after the purchase, it wouldn't qualify for the program I mentioned above. In that case, an FHA loan may be of benefit, but PMI would apply. Additional cost of PMI might be offset by the lower interest costs enough to make it worthwhile.

    I remember a mortgage I did one time that was an 80% 1st and 15% HELOC at purchase (effectively 5% down) that didn't require PMI. That type of loan would qualify for the refinance even if the value was now below the total of the 1st and HELOC.

    Hope that helps. MP, this is a program that I'm sure many Loan Originators are aware of. If you'd like Pat's contact information, let me know. Best of luck.
     
  8. Malum Prohibitum

    Malum Prohibitum Moderator Staff Member

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    HELOC was added much later. No PMI, no escrowing of taxes and insurance. Originally more than 20% down (I was so financially responsible back in those single to very early marriage days).

    Mafuta, what is not true? Please explain your ambiguous post. I sense that you have information for the thread, but we do not know what it is.
     
  9. Mafuta54

    Mafuta54 Active Member

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    The Bolded part is not true. I had PMI and the value of my home is less than I owe, yet I have refinanced it and closed in the last 10 days! I reduced the payment by about $140/Month this time. I did the same last year and took off over a $100 then.
     
  10. Malum Prohibitum

    Malum Prohibitum Moderator Staff Member

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    I guess my main point in starting the thread is wondering why the first mortgage cannot be refinanced. The first mortgage holder is in no greater risk of the security being insufficient just because the second is large. Assuming the second mortgage holder subordinates, then the first mortgage holder has a priority lien. In the event of a foreclosure, the first mortgage holder will not have a deficiency. The second mortgage holder may end up with the short end of the stick, but that should not influence the first mortgage holder.

    I do not understand the unwillingness to refinance the first mortgage only.
     
  11. Tinkerhell

    Tinkerhell Active Member

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    Not steal steal MP's post but this is the perfect opportunity for me to vent - I'm in Martin's boat right now I fear. My wife and I are about as good of a credit risk as a bank could ask for but because of buying a house just before the bottom fell out and getting 100% financing then I am afraid I'm about to find out that I can't knock 1.5% off my current 5.75% intrest rate with a refi through a new bank. My current holder won't do any kind of a refi so I'd have to look at a new holder. I just had the appraiser come out on Tuesday and I'm supposed to hear the outcome end of this week or begining of next. I'm praying it will at least come in close to what I need but I'm afraid the value is going to be more like 15% less than what it was 4 years ago.

    My loan isn't fannie or freddi so I can't refi for over the assessed value. Despite having never missed a payment in 15 years of being a mortgage holder, have great credit, 20yrs on the job with the present employer and little existing debt. If I can manage to get a refi I'll save $400 a month.

    If anyone has a free minute say a prayer for my wife and I sure would appreciate it! That $400 would sure make things easier for sending my boy to the private school I am planning on him going to. [-o<