Government Refinance Help?

January 7th, 2010

house and calculator

This blog post will definitely be educational, and does have a specific topic. However, it will end up sounding like more of a rant than anything! The topic for today’s blog post is a loan program called the “Refinance Plus.”

The Refinance Plus allows people to refinance who have less equity than when they bought the home. There are numerous guidelines that I will not bore you with, as I want to focus my rant/blog on one specific area of this loan program.

One example

My client originally had a 20% down payment when he bought his homes. After four years the home has gone down in value slightly. Instead of a $400,000 appraisal, which was what he bought the home for, we ended up with an appraisal for $385,000. Since my client had 20% down when he first bought his home and is not paying mortgage insurance, we need to stick to an 80% loan to value so he does not pay mortgage insurance on his refinance. For him to pay mortgage insurance on his refinance would offset the savings in reducing his interest-rate, and would make no sense.

However, 80% of $385,000 would be a new loan amount of $308,000. He had originally borrowed $320,000 which is 80% of the $400,000 purchase price, and he currently has approximately $315,000 left on that original loan. So we are $7,000 short of paying off his car loan, and he does not have that money available to pay out of pocket. He would also have to pay for his closing costs out-of-pocket. So the check that he would have to write at closing is well over $10,000. Had we received a $400,000 appraisal, or even $395,000; 80% of that figure would have been enough to finance the current amount of the loan, and some of the closing costs.

What’s the answer?

The easy answer to this should be to switch his loan application to the “Refinance Plus” loan program. Since it allows people to refinance with less equity than they originally had, and also allows them not to pay mortgage insurance even if they are going to be over 80% loan to value, this would be the perfect solution. However, one of the requirements of this loan is that the loan must currently be a Fannie Mae loan or a Freddie Mac loan, and then you must refinance it to the same type of loan. My client’s loan was originally a Fannie Mae loan, it still is a Fannie Mae loan, so I decided to refinance it to a Fannie Mae loan. This makes him eligible for the Refinance Plus loan, since we are doing a Fannie Mae-to-Fannie Mae refinance.

Fannie Mae loan lookup tool

However, when I go to the Fannie Mae loan lookup tool, found here: Fannie Mae Loan Lookup; it tells me that my client’s loan is not currently a Fannie Mae loan. And here is where the rant comes in…

The rest of the story

I did this client’s purchase loan originally, and I know that it was originally a Fannie Mae loan. My original file shows that it is a Fannie Mae loan. The credit report is showing that his loan is currently a Fannie Mae loan. The settlement papers from the original settlement shows that this loan is a Fannie Mae loan. I called the bank that currently services this loan, and they verbally confirmed that this loan is a Fannie Mae loan. At this point it seems quite simple, and my client should get his loan, correct?

Not so fast. The bank that is underwriting the new refinance loan tells me that when they go to the online Fannie Mae loan lookup tool and enter the client address, it is reporting that this loan is not currently a Fannie Mae loan. That aside, everything else shows me that this is a Fannie Mae loan. But the new bank will not approve his refinance under the Refinance Plus program unless they see it show up under the Fannie Mae loan lookup tool, regardless of the documentation in the file. Uhhh….OK, that makes sense.

The current loan servicer

I proceed to call the bank that currently services the loan, and Fannie Mae themselves, and the new bank underwriting the new loan, and try and get everyone on the same page. Then I spent over three hours in one day making all these phone calls, and what it boils down to is that it seems that the bank that is currently servicing the loan has mis-entered the address in the Fannie Mae database, and that is why it is not showing up as a Fannie Mae loan.

I am inputting the address as it shows on all the official paperwork (mortgage Note, Deed, settlement statement, etc), and the address was input in some format that I cannot guess at. For example is it Street, street, St, ST or STREET? And, is it APT #309, 309, #309, Apt 309, Apt# 309, Apartment 309, etc? The current bank told me the exact way they have it, which is the way Fannie Mae should have it since this bank is the current loan servicer, but I tried that address in the loan lookup tool, and it did not work. I tried dozens of variables of that address, none worked. Everything that I have documented in the file shows that this is a Fannie Mae loan, but my poor client will be unable to get his refinance because of an input error.

I am really unable to finish this blog post because I would have to use language that is indicative of something that goes beyond a rant, and, well, that is just not professional. Suffice it to say that one party is not talking correctly to the other party, and my client is caught in between, and I seem unable to get one party to correct their error with the other party, and everybody keeps point pointing the finger at somebody else.

I will just sum up my current feelings towards Fannie Mae (which is government), government programs, and large banks…they can all go and ‘#!*$!*@&!#!!”

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Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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