Need advice/new loan/answers

surefirewizard · Joined: 21 Jul 2006 Posts: 4 Location: Coon Rapids, MN

Greetings all,

Hopefully this is the correct place to put this.

From what I have read, there seem to be some fairly straight up lenders in here. I base that on the solid advice they have given. I am hoping to get that same solid advice for my situation and, if they beat the package I will show here, possibly some business for themselves.

My wife and I are both soldiers in the Army, currently stationed in Iraq.
We are looking to refinance our home (which is titled in her name only) Her original loan was a 2 year ARM 80/20 interest only (yeah, must have been good crack) First mortgage is at 6.15% for $176,000 and the second at 9.5% for $44,500. The two years is now up so there will be no pre-payment penalty. Both of these loans are currently at 6% because we are deployed soldiers but will revert to their new rates upon our return sometime in March 2007.

Having gone home on leave in June we decided to get the ball rolling on the refi thing. Her mother and father are living in our house while we are
deployed to watch our three kids. Her mother has full power of attorney for both of us. We went with a particular lady because her rates seemed to be good (not always a good indication of a good loan I have come to find out) After our leave was up and we went back to Iraq we were in the paperwork gathering stage. About a week and a half later her Mom was about to sign the paperwork!
Fortunately I was able to stop everything and review the GFE (which we did not have before leaving). I was horrified to see all the fees which leads me to part of the reason I am posting this. I would like to know if these fees are typical. I will tell you now that I refused this loan on the same day as the signing was to occur after reviewing the HUD-1.

The new loan would be using my income as I have the better credit score(710-720) now than my wife when she originally purchased the home but my wife will be on there also for the title but with no income.

The loan is for a 30yr fixed@ 6.875 $228000 (as of 7/1/2006) and payoff for our current loans is at $217700. When I asked her why we were asking for so much she said to pad for the escrows and other fees. Umm, ok. Here is the loan specifics from the GFE.

801. Loan Orig Fee 1.00% 2,280
810. Proc. Fee 495
811. Underwriting Fee 595
Doc Prep 150
Lender Admin Fee 505
Lender Underwriting 75
Flood Cert 20
1101. Closing/Escrow Fee 250
1108. Title Insurance 698
Asses/Name/Doc Rsrch 85
Title Exam 250
Abstract 225
1203. State Tax 524
1302. Package Handling 50
Recording Service 75
Est Closing Costs: $6277
Monthly payment $1752

This GFE does not even include the escrow accounts nor PMI which be required for this loan.

I grilled her about the lending fees over which she has control. I told her
I would not direct my mother-in-law to sign until I saw the HUD-1. The
HUD-1 came back with her origination fee gone (POC) and now the loan was for 224500. Thats great but my closing cost is now $6747. The changes were this: Appraisal $350 (she thought we were going POC that), 7 days interest $296 (fine), 1 yr hazard insurance $802 (on a refi do you need 1yr upfront as we already have insurance?), 3 mo escrow hazard insurance $200, 5 mo escrow property taxes $786 (fine), recording service fees went to $138, POA and attny in fact fee $184 (new fee), Conservation Fee for my county $5 (huh?), Notary/Witness closing fee $175 (new fee). Cash to borrower $51. So, had she not taken out her origination fee (which she lists on the HUD as POC $2750) my closing cost would have been $9497. Please note that the PMI is still not inlcuded anywhere on the HUD-1. I wrote her an email saying, ummm thanks but no thanks.

Here are my questions:

Did I do right by refusing this loan and am I correct that the fees are above normal?
Was there no need for 1 year in upfront hazard insurance as this is a refi and not a new purchase?

I would also like to see if anyone can beat the following loan I have a GFE on from USAA:

30yr fixed 6.625%, loan is for $221,283. Closing costs are $3569 total and include 30 days interest @$40 a day. The closing cost do not include prepayments for escrow of the hazard and property taxes. Est monthly payment $1646 excluding PMI.

Anyone have good alternatives to this 30yr fixed? I am not so much worried about PMI as I plan to be under the 80% and cancel the PMI within a year but the wife hates the PMI knowing that it is wasted money. With PMI its a trade off and dependent upon how long we plan to keep the home. We plan to be in the home at least 7-10 years and then may use it as a rental property.

Your help is greatly appreciated and I am sorry this post is exceedingly long.

Bill G.

surefirewizard · Joined: 21 Jul 2006 Posts: 4 Location: Coon Rapids, MN

I forgot a couple of things.

Since I refused the loan she has come back in a email stating we have to pay her for the appraisal ($350). Having not signed anything is this true? Our state is Minnesota. Are the laws regarding this and if so where do I find the information?

Our appraisal I would put at (and I am being conservative) $249k-254k. I am sure she won't tell me what it is now and I forgot to ask before I told her no on the loan. But if I am forced to pay the appraisal fee I will not remit until I see the results of said appraisal.

Thanks again.

Bill

chow · Posted: Fri Jul 21, 2006 10:37 am Post subject:

I think you bungled yourself out of a good deal. You're high on the LTV, she straightened out the HUD 1 fee's which are always going to change with 3rd party fee's And she dropped a point-the other fee's weren't hers and she can't keep that extra money if it's not in the 800 lines. The GFE has to be within 1% for tolerance, and if the final one at the closing table was wacked-your mom could have just got up and walked away.

I don't look at rates very often but IF that was the HLTV rate. it was decent. Fee's vary from state to state, her third party fees didn't look bad. (Take a look at someone who lives on the east coast. The local tax stamps are 1/2 of the fees!) The appraisal was ordered by her, and her company owns it. you have no right to it until closing. You didn't order it, or pay for it. If you move the loan to someone else, the appraiser will charge you again, because they did the current one for another lender.

m2c · Joined: 03 Aug 2005 Posts: 937

On the appraisal issue, did your POA sign the paperwork, get the rescission paperwork and then rescind? If the followed the proper procedure, the claim for you to pay for the appraisal is a “dead duck”. If not, there’s the “moral obligation” issue but you might have someone in the JAG office write a friendly letter to the LO.

On refi’s we never press to have expiration date extended so there’s a full year – just make sure there’s enough collected on the HUD1 to pay the renewal when due.

The 800 series fees would be a tad high (well, extraordinarily high) in our market area. These can be competitively driven with mix and match to rate.

I suppose I shouldn’t ask why you didn’t use your VA benefits two years ago to purchase this house but you MAY be able to use VA to refinance (benefit, no PMI). I think VA will go 95% LTV on a cash out – not sure of rate and term refis. We just don’t have many veterans in the market area and it’s been an age since I’ve done one. CHECK WITH SOMEONE WHO DOES VAs REGULARLY FOR AN ACCURATE ANSWER. If you were going the convention route the rate by itself was not bad for a high LTV (you never indicated what the current appraisal value was). BUT ….

Why do you want to refinance the first? The interest rate will be increasing with the monthly payment offset slightly by adding two years to amortization. All this at the cost of fairly heavy closing costs. Why not just concentrate on the 2nd mortgage? Around here you could replace your current 2nd with a lower fixed rate with only $150 in closing costs. This will vary by market but remember by just tweaking the 2nd, you avoid any issue of mortgage insurance.

surefirewizard · Joined: 21 Jul 2006 Posts: 4 Location: Coon Rapids, MN

Thanks for the replies thus far,

m2c,

My POA did not sign any paperwork so a recission was not needed. I just want to know if I am legally liable for the appraisal. I will probably pay it anyway becuase I feel that she did alot of work and I bailed on the day of closing. (I assume this is what you meant by "moral obligation")

As for first purchasing the house with VA, we just felt that conforming/conventional was easier and just as competitive. Less paperwork and less restrictive guidelines.

As for doing a VA now, its more expensive (unless a lender in here can say different) VA funding on this loan would be $5000 and up. Perhaps I dont really know enough about them so help on that end would be great. And i will research on the web.

The current appraisal of the house is ~$254000

We want to refinance the first because it is a two year interest-only ARM (just like the second mortgage). The two years are up and when we return from Iraq our interest rate will go high. What are ARM interest rates usually tied to? (I don't have my paperwork here in Iraq:) If we were to come home right now what would the interest and payment be on that loan?

Am I not thinking about this correctly?

Thanks for all your help,

Bill

m2c · Joined: 03 Aug 2005 Posts: 937

Ouch … I didn’t realize both were ARMs! Well, the day of reckoning has come.

You could consider a 5/1 IO ARM and at least be covered on a fixed basis for 5 years. Problem is that the rate spreads between the hybrid ARMs and fixed rates have narrowed significantly from when you purchased your home. My choice would be for a fixed. Although you intend to retain the property as a rental after you vacate, you might as well try a long-term solution now.

The USAA rate of 6.625% with no points for a R&T 90% LTV is basically the current market or what the current market would be in a reasonably competitive environment. Their closing cost appear “in line” but this does vary by state. Tell whatever company you select that you can provide a copy of the owners title policy and survey – could save you some money. Again this varies by state but it’s worth bringing up.

Right you are on the VA funding fee! I was thinking 1/2 % but that’s for IRRRLs.

This leave PMI. Automatic cutoff (with 90% LTV and 6.625% rate assumption) is 111 months – not the end of the world. I would ask about the availability of LPMI (lender paid MI). At your FICO level, it would be a one-time “hit” (usually via discount points) of 85 basis points ($1,938 assuming a $228K mortgage) versus an annual rate of 52 basis points for monthly MI ($98.80 per month). Dividing you get a payback period of 19 to 20 months. Issues:
1. Availability and price. We all cut deals with MI companies so might not be there for any given available everywhere and price may vary.
2. Debt ratio is lower
3. Total costs and payoffs need to “fit” in a 90% LTV scenario or you have to bring extra cash to closing or “mix and match” with rate and points.

P&I on the assume example of $228,000, 30 years @ 6.625% would be $1,459.91.

The appraisal. Personally, I’d feel obligated to go ahead and pay for it. I’m not at all sure the LO was playing fair with you on the HUD1 though. That’s my only hesitancy. Just remember the proper procedure for the future. This way there would be no question of payment. In fact if you have paid either the broker or appraiser (COD appraisal), the broker and/or lender MUST return the funds paid to you. I don’t like the law but we have to follow it.

surefirewizard · Joined: 21 Jul 2006 Posts: 4 Location: Coon Rapids, MN

m2c,

Thanks again for your response and help, It is very appreciated.

Here is what I have decided to do:

I am hedging that the next time the Fed meets they wont raise interest rates and that rates will remain flat or even go slightly lower.

I have decided to wait until December or so. Have the house reappraised at my cost through my lender (the house is being totally resided and reroofed right now). It should appraise above $254000. Whatever it appraises for, I will make up for in cash to bring the LTV under 80% thus avoiding PMI altogether. I figure I will need under $23000. I will make it.

I think this is the best plan as it allows us to:

1. Remove the second mortgage allowing us to, if needed, draw on our equity.

2. Avoid PMI

3. Lower monthly payment

4. Possibly get a better rate

FYI I did check into the VA loan program through a website VALoans.com. They basically told us not to bother and to get a conventional because the loan funding is 2.3% of the loan for first-timers or 3.3% for re-users of VA Benefits. Unless you have a war related injury or receive disability or get the Medal of Honor or some such stuff there is no way to get out of the loan funding fee.

USAA seems to be the best deal out there for military. Its a military only type organization. Their lender fees are $400 flat. Total closing should be under $3000.

Thanks again for your help

Bill

chow · Posted: Sat Jul 22, 2006 10:17 pm Post subject:

So, what is the rate? (yep, give the borrower a "Cloak" and then hand them the Daggar.)

Since this money selling business is the second oldest Profession in the world. second only to prostitution-

Can you tell me this USAA thing is a good thing?

Ask my husband-I'm pretty straight up.

Selling money is really close to...That first profession.

nats · Joined: 14 Aug 2006 Posts: 2

I'd like to know the answer here. Could anyone tell me how it worked out?

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

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