Question and Answers about Federal Mortgage Loan Refinance and Restructuring
Monday, April 13th, 2009Last week, government officials warned about loan modification scams and predatory mortgage aid offers from brokers and loan relief specialists. Homeowners should be alert and do their due diligence of companies, when considering refinancing for a loan workout from a company other than your existing mortgage lending company. Some of the reports have indicated that struggling borrowers have been paying fees of $2,000 to $5,000 in up-front fees to companies that promise foreclosure prevention. Some government officials say such operations are usually fraudulent because help is available for free from government-approved housing counselors. However, most people understand what kind of services they get for “free.”
QUESTION- Is it possible my payments will be higher?
ANSWER- If you’re still paying a low, intro rate, it is possible your monthly mortgage loan payment will increase more under the federal refinancing program. But the idea is to avoid the surprise interest rate adjustments and negative amortization that erodes your home equity even in a healthy housing market. In the last few years, 2/1, 3/1 and 5/1 ARM’s have sent shock waves through communities across the nation, because borrowers were suddenly hitting their variable rate period with no options to refinance into a reasonable fixed rate mortgage. After submitting a request for the Making Home Affordable program, your current mortgage lender should give you a “good faith estimate” that includes your new interest rate, mortgage payment and the total cost of the loan. Compare the numbers with your current loan; you might decide that refinancing isn’t an improvement. You can also check out the payment reduction estimator on the government’s Web site at http://www.makinghomeaffordable.gov.
QUESTION- Should I wait to see if mortgage interest rates come down in a couple of months before applying?
ANSWER- Probably not, since mortgage rates are at historic lows. Last week, rates on thirty-year mortgage loans inched upward to nearly 4.9%, but that’s still close to the lowest level since the Great Depression. Ken Inadomi, director of the New York Mortgage Coalition said, “Waiting for mortgage rates to drop further would be irresponsible and could backfire.” Even low intro mortgage rates should not be that much lower than fixed interest rates these days and in some cases, they may even be higher. So it’s probably in your best interest to lock in now to a low rate refinance loan that you can afford. Remember, the Making Home Affordable program expires on June 10, 2010. Read complete article > Is Mortgage Relief Melting with Loan Mod Scams
