In our mail today, we received two very attractive offers to refinance our current mortgage. Wow, how [photopress:MPj03876060000_1_.jpg,thumb,alignright]exciting! Here are the details:
Offer One–This is your “Final Notice”
Reducing our current mortgage rate to 1.75% for 5 years. A Senior Rate Reduction Consultant is waiting to assist you. The APR on this offer is 6.308%.
This offer will expire on May 14, 2007. Here’s my favorite part: No other notices will be issued and no representatives will call you. (Darn…the clock is ticking!)
Offer Two…Takes the Cake! (It’s even printed on pink paper)
“Your Mortgage Master loan in the amount of $375,000 can be restructured to a (you better sit down for this one) a 10 year payment at only $79. This is not a typographacial error. Your payment rate is only 1/4% and is fixed for 10 years….
Call us today and have no house payments until June 2008“.
Of course I had to call them! The gentleman was very friendly (much nicer than the chaps I dealt with trying to help Jillayne uncover the Vacation Mortgage). First you must meet their guidelines. “Slick” tells me that one of their biggest “catches” to get around is loan to value…lucky for me, we meet the 70% or less LTV requirement. You also must have credit scores of 680 or better and not plan on moving for 3 years or you’ll have the opportunity to pay a prepayment penalty.
Me: What is the rate based on?
Slick: 0.25% interest only
Me: I mean, what is the base rate? How much is the deferred interest?
Slick: Wow, you seem to know a lot! 6.750%
Me: At what point does the mortgage recast?
Slick: 150% (yep…that’s what he said….150%). I can’t believe it either!
This means that every month you make the 0.25% interest only payment of $79; the difference between that and the fully amortized payment is tacked on to the back of your loan. This difference is $2,322.17.
This would be allowed to continue until my original mortgage balance of $375,000 reaches $562,500! I estimate this would take 80 months (or just shy of 7 years). Although the rate is fixed for 10 years, the loan will recast into a fully amortized mortgage when it reaches the 150% cap.
If we assume that my house is worth $550,000 today and has a mortgage balance of $375,000. In 7 years, we know that if I did this refinance with Slick, my mortgage balance would be $562,500. We really have no guarantees on what my $550,000 home will be worth in 7 years. Not to mention what would happen to my credit scores having a mortgage balance that was increasing over the original loan balance.
Last but not least…we’ve finally uncovered the “vacation mortgage” mystery! With this program, they also offer to give you 12 months off of your mortgage payment as a “credit”. It’s very easy for this type of lender to do. At $79 a month, 12 months of mortgage payments would be $948. It’s simply priced into the loan by rebate, margins or the prepayment penalty.
Pretty slick….huh?
OMG, Rhonda we are both SO LUCKY. Because I too have been getting offers to refinance my mortgage also! WOW. Imagine, I can lower my monthly payment to a FIXED mortgage of 2.66%. That’s right, my payment would go way down!
Approval in minutes
low credit scores-no problem
liens and bankruptcies-okay
no income verification-okay
When I called the 1800 number to talk to the owner of the company, to politely point out that their ad was missing a couple of important pieces of data that would make the ad in compliance with federal truth-in-lending laws, the person answering the phone said that there was no boss around for me to talk to.
I asked her why and she said that I have two choices: to apply for a loan or to have my fax number removed. I asked her if she could leave a message for her boss and she said she works for 60 different mortgage brokes. I asked her if she could leave a message for all 60 mortgage brokers and she said no, that my only choices were to apply for a loan or to have my fax number removed.
I asked her if she was a licenced loan originator and she said “no.” I asked her if she knew that she was violating a state law by taking loan applications without a license and she yelled at me.
So there you have it.
I predict that we will see a rise in the number of aggressive loan solicitations. Clearly there is a entire breed of mortgage firms and loan originators who have had a taste of the big money to be made by selling only subprime loans using bait-and-switch & deceptive advertising, and now they know no other business model.
Both of the ads we received today had WA DFI numbers! A letter looking like a income tax return that I received the other day, did not and is out of CA.
It would be great if DFI or someone had a fax number to submit these to. Actually, since it’s difficult for a consumer to know which authority a certain type of motrgage originator reports to…it would be great if there was one fax number and someone then sorted out the complaints to the appropriate authority. But I’m dreaming!
Original: “Wow, you seem to know a lot!”
Translation: “Wow. Most people think I’m offering a 0.25% loan when I say the rate is 0.25%. I’m guessing this isn’t going to turn into a sale because you actually have a brain.”
Original: “Slick”
Translation: Sleaze”
With regards to meeting the conditions of the low LTV, Slick also said something along the lines of “that’s usually a catch”, translation: I usually get to “bait and switch” at this point.
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If you receive misleading mortgage mail (ex. looks like an IRS refund, APR not included, etc.) for your Washington home, you can send it to:
Enforcement Unit
Division of Consumer Services
Department of Financial Institutions
PO Box 41200
Olympia WA 98504-1200
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