More refi horror stories
Some friends of our have gotten stuck in a refi nightmare. These are intelligent, educated parents with young children who started out a small starter home in a good neighborhood. They had a low tax rate and great schools. Then they got lured into a new tract with gorgeous houses, and they thought they got a great buy. They sold their first house quickly during the seller's market and put a nice down payment on the new house. They moved in, the builder made lots of repairs, and they painted and decorated. Things seemed great. The honeymoon period ended abruptly, however, when their insurance person decided to go over everything to make sure they had sufficient insurance. To their shock, he discovered that their impounds just didn't make sense. They double-checked and realized that the person who did their loan on the new house had used the tax rate on the raw land before the original property was subdivided and any of the houses built. Whoops...
Suddenly, they were faced with paying another 10k a year in property taxes as the new house also had Mello-Roos, bringing their tax rate to a whopping 1.8%. Values were high at the time, so they put the house on the market, but they weren't able to sell it. So they refi'ed only to find that their original loan was supposedly paid off while no new payment was arranged for them. This state of limbo dragged on for some days, then the manager tried to get them to take a different payment amount and also to sign off on the change. They realized then that the new loan agent had also made some kind of error, but that someone higher up had caught it because the company would have lost money on the loan. Eventually, they came to a compromise, but our friends still didn't have a loan they liked. The company promised them a free refi later on, but when they tried to contact the loan officer about it, he didn't return their calls.
So they went on to their 2nd refi, using their third lender. They decided to take advantage of the increased value of the house and take out some money to put into the property. They put in irrigation, sod, and a lovely stamped concrete patio with an Alumawood cover and fans. Then several months later, they looked at their statements, and realized that they owed about a thousand dollars more in principal each month. That's when they discovered that they'd been duped into an Option ARM, and that their payment, which had sounded so attractive, wasn't even covering the interest. In effect, they were doing a reverse mortgage! On top of it, they found out that just an interest-only payment would cost them about $4000 per month.
By now, they were sick of the house and were thinking of trying to sell it again. Prices were getting lower daily in the neighborhood, and now they saw that they were in debt for about 100k more than they could even sell it for, with luck, and perhaps after 7 months on the market. They considered refinancing yet again, but at this point, their newest loan officer recommended against it. He told them to stay put for a few years, continue with the interest-only payment, and wait until the market improves.
After my own parents' fiasco, I called them and told them that if they ever do get another loan, to please call me, and I'll come as soon as I'm able to read the whole trust deed before they sign it or at least before the rescission period runs out.
Oh, and by the way, one of the refi companies was ... you guessed it, Countrywide...
Suddenly, they were faced with paying another 10k a year in property taxes as the new house also had Mello-Roos, bringing their tax rate to a whopping 1.8%. Values were high at the time, so they put the house on the market, but they weren't able to sell it. So they refi'ed only to find that their original loan was supposedly paid off while no new payment was arranged for them. This state of limbo dragged on for some days, then the manager tried to get them to take a different payment amount and also to sign off on the change. They realized then that the new loan agent had also made some kind of error, but that someone higher up had caught it because the company would have lost money on the loan. Eventually, they came to a compromise, but our friends still didn't have a loan they liked. The company promised them a free refi later on, but when they tried to contact the loan officer about it, he didn't return their calls.
So they went on to their 2nd refi, using their third lender. They decided to take advantage of the increased value of the house and take out some money to put into the property. They put in irrigation, sod, and a lovely stamped concrete patio with an Alumawood cover and fans. Then several months later, they looked at their statements, and realized that they owed about a thousand dollars more in principal each month. That's when they discovered that they'd been duped into an Option ARM, and that their payment, which had sounded so attractive, wasn't even covering the interest. In effect, they were doing a reverse mortgage! On top of it, they found out that just an interest-only payment would cost them about $4000 per month.
By now, they were sick of the house and were thinking of trying to sell it again. Prices were getting lower daily in the neighborhood, and now they saw that they were in debt for about 100k more than they could even sell it for, with luck, and perhaps after 7 months on the market. They considered refinancing yet again, but at this point, their newest loan officer recommended against it. He told them to stay put for a few years, continue with the interest-only payment, and wait until the market improves.
After my own parents' fiasco, I called them and told them that if they ever do get another loan, to please call me, and I'll come as soon as I'm able to read the whole trust deed before they sign it or at least before the rescission period runs out.
Oh, and by the way, one of the refi companies was ... you guessed it, Countrywide...
posted by Alma Jill Dizon, Riverside Realtor @ 10:52 PM
1 Comments:
At 7/29/2007 5:05 PM,
Anonymous said…
Talk about a horror story! It's disgusting that this happens at all, but the truth is that it's more commonplace than most people want to admit.
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