Having recently initiated the refinance process, I’ve taken some interest in opinions from those in the industry.

When talking to the loan officer at Wachovia, I had to ask the requisite question: “Which direction do you see rates going?”  Not one to look a gift horse in the mouth (the refi rate would be 4.625% vs. my current 6.66%), I wasn’t going to let his response become a deal breaker, but I thought I’d ask anyway.

The answer didn’t surprise me.  He kind of hemm’d and haw’d around, and I saved him the misery of coming up with a response that wouldn’t put him in a bind, and just gracefully switched topics.

I knew that whatever answer he gave me could get him in trouble.  If he says rates will fall and they do, I’d be mad that I didn’t wait for a better rate.  If he says they go up, and they actually drop, he’s still in a bind.

If he really knew the answer, he wouldn’t be a loan officer.

Then came the appraisal.  The guy shows up with his tape measure, pen, pad and a camera.  Naturally, I had to ask him how business was going.  It was a rhetorical question, really.

Business was picking up, especially for third-party, independent appraisers.

Apparently, and this will come as little shock, banks were using their in-house appraisers to determine the value of the home, which ended up getting inflated by 100-300%.

Starting on May 1, loans sold to Fannie Mae and Freddie Mac will require an appraisal chosen by the two big banks.  In essence, the lender will be able to chose the appraiser, and in the in-house lender is chosen, the banks loan origination department will have no oversight for the process.

Unfortunately, the rules will only apply to Fannie and Freddie.  However, due to the trickle down effect of the loan trade, the effects will be spread far and wide regardless.

Since a large number of loans are bought by or guaranteed by Fannie or Freddie, the entire industry will have to play by the same rules if they want to play.

The Corner Office Comments

It’s a start.  This is a move that one would think would be inherent to the system to begin with, however, as we’ve found with our government, common sense does not reign supreme.

In talking to the appraiser who evaluated my home, it seems that the while the practices are still the same, the principles just got a lot tighter.

No more benefit of the doubt (not that I was looking for one).

Finance, Real Estate appraisal, Fannie Mae, Freddie Mac, loans, mortgages, refinance

About a week ago, out of the blue, I had this feeling I should call my bank and find out what the current refinance rates were.  Rates had been coming down, and with all the money being thrown around in the financial sector these days, I figured it couldn’t hurt to ask.

After about 5 minutes on the phone with a Wachovia representative, he informed me that an FHA loan with decent credit would refinance at 4.875%.  A Far cry from my current 6.66% rate!

Not bad, but I don’t want an FHA loan.

So after listening to the schpeal about the FHA loan, I asked him to tell me what the refinance rate was for a 30-year conventional loan.

“Well, if you have excellent credit, and the appraisal comes back with at least a 80% LTV, I can do 4.625%.”

Right… so how much will that cost me?

After asking him to repeat the number he just gave me, I then started digging for the catch.  You know, the gotcha on a heck of a good deal that they don’t tell you about until just before you sign on the dotted line.

“It looks like it will cost $1,900 for closing costs and fee’s, but we’ll pay them.”

Honestly, I thought I was being Punk’d.

I figured what he meant was that he’d wrap the closing costs back into the loan.  Nope.  The bank will actually pay the closing costs and associated fees (appraisal, title, etc).

Not wanting to look a gift horse in the mouth, I asked him to send me an application, with the rate locked in at 4.625%.

UPS next day air and it was on my desk.

After reading through all 60 pages of the application (I actually read it twice, still looking for the catch), I sat down with my wife and went over it.  Nothing seemed out of line, and I am able to withdraw my application at any time.

At any rate, it’s a good time to call your bank.  I don’t care what your current mortgage rate is at, it’s still worth the phone call!

Yesterday the appraiser stopped by and took measurements for the appraisal.  I’m crossing my fingers that I’m still at my 80% LTV, and that local market prices haven’t dropped that much.

Banking, Finance, Real Estate loans, mortgage rates, refinance, Wachovia