New Chapter in my Mortgage Refinance Journey: The Home Affordable Refinance

When I first heard about Obama’s “Making Home Affordable” program, I didn’t go searching out information. Why would I? I had 20% equity in my condo only 6 months ago. The program was for people who were underwater on their mortgages, or were delinquent on payments. Additionally, I had already started the refinancing process with Wells Fargo, I didn’t need any help with my refinance. There’s just one problem, my condo appraised for only $220,000!

Appraisals

Back in October of 2008 when I closed on my condo, it appraised for $290,000. Over the course of 6 months, my condo dropped in value by 25%. According to this appraiser, not only do I have no equity in my home, but I owe more on my mortgage than my condo is worth.

The appraiser used sales prices of condos within 0.5 miles of my condo from the past two months to determine the value of my condo. The major problem I see with this method is the appraiser has no idea why those people decided to sell their condo. What if they had purchased a home and were forced to unload their condo so they could close on the house? If you’re relying on sale prices in the area, don’t you have to find out a little more information about the sale? I think so.

Bad News

In the end, Wells Fargo had to put the Kabash on my mortgage refinance after the crappy appraisal. I still have to find out if the $300 on my credit card for the refinance will get refunded, but I’m hoping it will. As a small consolation, my Wells Fargo lender filed a complaint with the appraiser as it wasn’t the first time he felt the appraiser severely undervalued a property.

Good News

My Wells Fargo lender said that I would qualify for the home affordable refinance program as soon as it’s up and running, which is supposed to be during the first few days of April. He’s putting me on the short list of people that he will be calling as soon as the program is a go. Here’s to hoping the rates stay low or even go lower.

Home Affordable Refinance

The home affordable refinance program is designed to help people who are current on their mortgages, but are unable to take advantage of these low rates because of a decrease in home value. It’s also designed to help people refinance to a fixed rate mortgage from an ARM, interest only or balloon mortgage. The following are the qualifications:

• Own a one to four unit home
• Loan is owned or securitized by Fannie Mae or Freddie Mac
• Current on your mortgage
• Have income sufficient to support the new loan
• The refinance offers long-term affordability or stability
• Refinanced mortgage can not exceed 105% of the current market value of the property

I fit into each and every one of these qualifications. I barely meet the 105% of the current market value requirement, as 105% is $231,000 and I owe about $224,000.

Does Fannie Mae or Freddie Mac Hold Your Mortgage?

The best way to determine whether or not Fannie Mae or Freddie Mac holds your mortgage is to call your lender. My lender told me mine was held by Fannie Mae. Otherwise, you can use the following information:

• Fannie Mae
  • 1-800-7FANNIE
  • www.fanniemae.com/loanlookup
• Freddie Mac
  • 1-800-FREDDIE
  • www.freddiemac.com/mymortgage

Will I Have to Pay PMI?

This was a very important question for me when I was researching this program. I put down 20% at closing so I didn’t have to pay PMI. The home affordable refinance program states that if you are paying PMI on your current mortgage, you will have to pay PMI on your refinanced mortgage. If you are not paying PMI on your current mortgage, you will not have to pay PMI on your refinanced mortgage. This is a huge relief, as I worked very hard to save 20% to avoid paying PMI.

Final Thoughts

I’m very irked by the whole situation. I know the economy, especially the housing market, is in the dumps, and I know there are others who have lost more, but I know my condo is worth more than it was appraised for. My area has not been hit very hard by the housing downturn. How could my condo have lost $70,000 in value in 6 months? I hope the rates will remain down, otherwise that appraiser will have cost me thousands of dollars in lower mortgage payments. At least I don’t plan on selling for another 5 years.

Random Thought

Ugh. Purdue didn’t even show up tonight. They definitely out hustled UCONN, but they couldn’t make free throws or layups and the balls didn’t bounce their way. They’re so young though, there’s always next year. BOILER UP!