As part of the government’s settlement  with five of the country’s largest banks, there is money available to help borrowers refinance their mortgages. The idea is that refinancing to a lower interest rate can help borrowers make their payments with greater ease, and the banks can meet the terms of the agreement.
“There is a long history of institutions settling claims to avoid litigation,” Dr. Andrea Heuson said. Heuson is a Professor of Finance at the University of Miami in Florida. Heuson pointed out that banks don’t have to go through discovery, and deal with legal fees, when they settle like this. “[This is] just another one of those solutions that involves some retribution…It’s a pretty good agreement, given the way institutions are taking advantage of it.”
Heuson said that some sort of solution has been long overdue. Right now, there has been a lot of focus on Chase, since the bank has been sending letters informing borrowers of the fact that their loans have been refinanced by the company. In many cases, this is a surprise to the borrowers involved .
Chase isn’t the only bank offering this service, though. Andrew Schrage at Money Crashers pointed out that other banks are also getting in on the act — even though their methods might not be as dramatic as a surprise refinance. “The average offer from Bank of America was expected to reduce mortgages by $150,000,” he said. “The refinanced loans  offered by Wells Fargo lowered interest rate by roughly 2.5%. Citigroup is expected to offer up to $2.2 billion in savings for homeowners, and Ally $310 million.”
Schrage said that the results should be immediate and substantial. “The banks now get more credit for loans refinanced within the first year of the terms of the settlement, so they’re rushing to get them reprocessed.” Chase is moving quickly, he said, because asking customers to take the initiative and contact the bank didn’t offer the desired. Instead, Chase just started sending out letters, setting forth the new terms, and making it easy for borrowers to simple sign the agreement.
What If Your Mortgage Isn’t Included?
Perhaps you haven’t heard from your mortgage lender about the possibilities. Don’t let that deter you. “If your loan is granted by one of the institutions named in the settlement, you want to march yourself into the office, and ask them when it’s going to happen. Don’t wait for them to write you,” Heuson said.
Even if your mortgage isn’t owned by one of the banks involved, you might still be able to take advantage of the lower rates through refinancing . “Even if your lender isn’t part of the settlement pool,” suggested Heuson, “take the information in to the lender and ask for a refinance.”
Heuson said that it is much better to get a refinance than to reduce your mortgage balance. “You don’t want the balance lowered,” she insisted. “It can open you up to taxes on the federal level and the state level. If consumers have the choice, it’s better to take the refinance than something that can be seen as loan forgiveness.”
(Photo: Images_of_Money )