Comments on: Loan Modifications Reamortize, Don’t Affect Fixed Rates

By: poor boomer

poor boomer — Sat, 27 Dec 2008 19:49:27 +0000

So it will take longer to “kill” your loan.

By: jim

jim — Wed, 24 Dec 2008 18:48:08 +0000

I didn’t look and, knowing how I was then, probably wouldn’t have cared. As a 25 year old prospective homeowner, I was thinking only of keeping costs as low as possible (and I had no idea that I could pay $500 and drop the rate just like that had the loan remained with the same lender). Also, I know that I thought rates would only be going higher, that’s why I didn’t go for a 5/1 ARM, and never expected rates would be falling like this.

I agree that the impetus of our problems was the fact that Fannie and Freddie bought up everything under the sun, though the severity was probably the fault of derivative instruments that relied on those loans. Either way, we’re in the mess now and we still rely on S&P/Moody ratings despite their utter failure and complacency during the runup.

By: Jess

Jess — Wed, 24 Dec 2008 18:15:10 +0000

Yes, that is the whole problem. The question for the lender is: Do you sell your mortgages into the secondary market or do you hold them to maturity. Some lenders sell with servicing retained. If they sell with servicing retained or they sell with servicing relelased, then you can not modify the mortgage. The disclosures you receive when you apply for your mortgages show what percentage the lender sells. We sell less than 1%.

I absolutely beleive that a major reason for our economic problems is that too many lenders got too aggressive because they could sell their poorly underwritten paper into the secondary market and think they were getting rid of the credit risk. Of course, lax government supervision let them get away with this.

By: jim

jim — Wed, 24 Dec 2008 02:10:27 +0000

Hmmm I guess it just depends on your lender because BB&T said that wasn’t possible. I wish it were so easy, I’d do that in a heartbeat.

The mortgage I originally had was through a lender in the area, though they sold it to Citi and BB&T afterwards, does that count?

Thanks!

By: Jess

Jess — Wed, 24 Dec 2008 00:46:14 +0000

Jim:
Unfortunately, you are NOT correct. If you have your mortgage with a community bank who holds the loan rather than sells it, the interest rate can be modified for a small fee. For many homeowners this is preferrable to the hassle of refinancing. The mutual savings bank I work for modifies mortgages for current mortgagees for a $500.00 fee at the current market rate plus 0.25%. Therefore, a current customer of my bank can get their mortage interst rate modified from its current level to today’s inteerest rate for a $500.00 fee. No re-appraisal, no application, no verifiaction of income, just a $500.00 check. Too bad more people don’t bank with their local community bank or credit union. These institutions employee people who live and work in your town, spend their salary in your stores and support the local non-profit organizations. We contribute 10% of our net income to 501c3 organizations in our service area. Much better than sending your savings to AIG for a slightly higher rate.

By: jim

jim — Mon, 22 Dec 2008 19:32:47 +0000

So far I only have one response from BB&T, no one else has gotten back to me yet, including LendingTree… I figured it’d be faster than this.

By: Peter

Peter — Mon, 22 Dec 2008 18:31:51 +0000

Thanks for chronicling your adventures in refinance – i’m about to go through the same thing so its good to read someone else’s experience.

By: Trevor - 14 Year Old Money Blogger

Trevor - 14 Year Old Money Blogger — Mon, 22 Dec 2008 17:25:37 +0000

Great job for clearing this up for your readers.