If you’ve ever secured a mortgage or refinanced a mortgage, you very well might have gone through a mortgage transfer of servicing rights. Unless you secured your mortgage from a major bank, your lender would have sold your mortgage to a large bank for servicing. Smaller lenders and banks don’t have enough capital to service mortgages until completion, so they sell them usually prior to closing. Within the past year I’ve secured my first mortgage, as well as, refinanced my first mortgage. In both instances the mortgage transfer of servicing rights were slightly different.

When I recently refinanced my mortgage, I found a lender who was able to offer me a great rate with low closing costs because they did everything in house. I’m not completely sure what that means, but it has something to do with performing all of the tasks (securing the loan, underwriting, etc) all within a very small amount of time. Because they didn’t have to lock anything down for an extended period of time they could reduce rates and closing costs.

At closing some of the documents I signed pertained to the sale or transfer of servicing rights. It stated that my lender had sold my mortgage to Chase effective October 1st, which coincided with my first mortgage payment. I was given contact information for both my lender and Chase.

I don’t know why they have to make all of the documents that you sign when you close on a mortgage so difficult to understand, but I wasn’t quite sure where my first payment should be sent. I called Chase and they said they didn’t have my information yet. I called my lender and two days later they have yet to return my call.

In the end, I decided to send my check to Chase as I’m sure my lender has washed their hands of my loan already. I just don’t understand why Chase wouldn’t have my information yet. It would make sense to me to have an account set up and to have contacted me to set up online payments if I wanted to do so.

When I secured my first mortgage, it was with a different lender and they sold it to Wells Fargo. As much as I don’t like how Wells Fargo treated my attempts to refinance my mortgage directly through them, they handled the transfer of my servicing much more efficiently. I had a letter in the mail a week or two after closing that directed me how to set up my online account. I then called and set up my online payments and talked to a real live person who told me everything was set up for the next payment and I didn’t have to send a check.

I suppose those are the two ways you might have to deal with a mortgage transfer of servicing rights. Either they contact you before your first payment is due, or they contact you after the official transfer date. I’m hoping Chase contacts me soon. I’m one of those people who likes to have all bills set up to be paid automatically so I don’t accidentally forget a payment.

Has anybody else had interesting stories regarding a mortgage sale of servicing rights?

Post from: Personal Finance Start-Up Blog

• My Mortgage Closing and Effects of the Credit Crisis
• Free Money with PayPal and Blockbuster
• End of April 2009 Financial Status
• Goals Update for End of July 2009
• Understanding the Mortgage Amortization Schedule

• Introduction to Mortgages pt 1 of 5
• Best Debt Management - How to Choose the Best Debt Management Service
• Things to Have Removed from your Credit Report
• Five Easy Steps to Online Financial Security
• Mortgage Loan Modification - 5 Things You MUST Know About The $75 Billion Housing Plan

I made a new amortization schedule based on my new interest rate, remaining principal balance and monthly payment. When compared to my previous amortization schedule, the benefits of a 15-year fixed mortgage are super obvious. In order to show my amortization schedule within a reasonable amount of space I hid 11 of the 12 months of the year.

The first thing that jumps out at me is the amount of my monthly payment that goes towards principal. With my 15 year fixed mortgage, my first payment has $855.67 going towards principal. With my 30 year fixed mortgage, the first payment had $214.63 going towards principal. It wouldn’t be until the 18th year that I would begin paying around $850 towards principal. The 15-year mortgage quadrupled the amount of my monthly payment going towards principal.

The second thing that jumps out is the ratio of the interest to principal portions of my monthly payment. I am only paying slightly more towards interest than towards principal. In fact, the ratio shifts towards the principal’s favor before the first year is over. For my 30 year mortgage, my first payment was 85/15 interest/principal and it took 19 years to pay more towards principal than interest.

The final thing that jumped out was the total interest paid. My 15 year mortgage has me paying around $90,000 over the life of the loan. My 30 year mortgage had me paying around $275,000 over the life of the loan.

I know it’s kind of like comparing apples to oranges because the interest rates differ by 1.50%, but there is only one downside when comparing a 15 year to a 30 year mortgage. The monthly payment is higher for 15 year mortgages. My monthly payment increased by $350. There are people that argue for 30 year mortgages by saying it’s nice to have extra cash for emergencies. They also say it is better to invest that money ther than put it towards principal. They also say you can make a 30 year mortgage the same as a 15 year mortgage by paying the difference towards principal every month.

Each of those statements are valid points. I just have a really hard time comparing the two amortization schedules and not feeling happy that I have a 15 year mortgage rather than a 30 year mortgage. It’s painful to pay so much money every month and not see your equity increase very much. The numbers are very powerful.

FYI, learn how to make your own amortization schedule.

Post from: Personal Finance Start-Up Blog

• Effect of Government Takeover of Freddie Mac and Fannie Mae on Mortgage Rates
• My First Mortgage Payment And Updated Amortization Schedule
• The Personal Finance Start-Up Blog Begins
• My Favorite Articles of the Week
• Understanding the Mortgage Amortization Schedule

• 30 Year Fixed Mortgage Rates The Basics
• Balancing Good Vs. Bad Debt In This Economy.
• Did You Know Your Mortgage is a Closed End Loan?
• My Extra Payments towards my Auto Loan was not being applied to Principal!
• Add a windfall to your snowball

Fortunately, this will be the last in my posts regarding my mortgage refinancing journey. In my last post I mentioned that I was just waiting to close, and today I closed.  It feels fantastic to not have to worry about interest rates, closing costs, appraisals, etc. There was, however, one final obstacle that I had to hurdle prior to closing my refinance.

Three days ago my mortgage broker called and said that there was a minor hiccup with the refinance. He said everything was ready and the refinance was cleared, I just had to come up with $5,600 to escrow for property taxes. $5,600!!!!!!!! What!?!?! I was almost in shock. Why did I have to escrow $5,600 for property taxes? Apparently, the title company requires new construction properties who are closing within two months of property tax assessments to escrow 2% of the appraised value to cover their own behind.

I understand not wanting to be up a creak without a paddle, but $5,600? I discussed property taxes with my Mom for a few minutes where she informed me that when you pay property taxes, you are really paying for the prior year. Every October your property is assessed for property taxes. You then pay those property taxes in two installments, March and October. Your 2008 property taxes are paid for in March and October of 2009. So why did I have to escrow $5,600 to pay 2008 property taxes when I only lived in my condo for three months?

My mortgage lender couldn’t answer my question, so he sent me to his underwriter’s house yesterday. The underwriter had all of my documents ready to sign so that I could close if I got my questions squared away. He showed me the Hud and I nearly cried as the cash from borrower was $10,732.26. All I thought I was paying at closing was my closing costs of no more than $1,600.

There were two reasons for such a high number. First, the $5,600 escrow requirement as well as the fees necessary to set up the escrow account. What a rip. Second, my August mortgage payment hadn’t gone through when the underwriter put the package together so I had some principal, interest and late fees that were going to be removed once he verified my payment went through.

I finally got around to asking my question about property taxes. During the discussion I made him aware that the builder was still in charge of the property and association. As soon as I said that he told me I didn’t have to escrow $5,600 and he would cut the portion of my monthly payment that would be going into my escrow from $466 to $50.

I returned to the underwriter’s house this morning, the day the funds are dispersed, to sign all of the documents. Right away he showed me the Hud and I was pleased. The cash from borrower was now $2,760.41 instead of $10,732.26. The total cash from borrower was higher than the closing costs I was quoted ($1,600) because it included interest to both my old bank (Wells Fargo) and my new bank (Chase) for September. I won’t make my first payment until October. Also, I had to pay down principal until the outstanding balance was $240,000 to reach 20% of the appraised value and avoid PMI.

I’m definitely glad this whole refinancing is behind me. I now know what to expect from a refinancing. I learned some very important information about property taxes. I have a mortgage lender who I will definitely do repeat business with and recommend my friends to. I am no longer paying interest to Wells Fargo, which I’m ecstatic about after they screwed me out of $360. I have a significantly lower interest rate, when coupled with a lower term (15-year) will allow me to build up equity quicker and pay less in interest ($90,954.36 instead of $276,081.18, nearly $200,000 less!!!).

In the near future, look for a post about my new amortization schedule and my foray into property taxes. I will be discussing property taxes with the builder to figure out how this will work until I am given my own tax bill by the government.

Post from: Personal Finance Start-Up Blog

• Financial Goals Update as of October 1, 2008
• 2008 Financial Goals, A Year End Review
• Effect of Government Takeover of Freddie Mac and Fannie Mae on Mortgage Rates
• Determining Property Taxes For New Construction Condos
• Mortgage Rates are Dropping, but Fees are Rising

• Know Your Property Taxes Before You Invest
• Preparing Our 2006 Tax Return - Almost Completed
• Property taxes on my mind
• Will Florida End Property Taxes?
• What Do Your Property Taxes Pay For?

The last post about my mortgage refinance journey left off with me waiting for either the DU refi program to come through or Fannie/Freddie to revoke their ridiculous hatred towards condos. So I waited and waited for one of the two situations to shake out so I could reap the benefits of a 4.875% 30-year fixed mortgage. Neither happened.

My lender called two days ago and said he could get my application approved without either of the two options above. I didn’t really follow all of the details except that I was good to go. The only problem was that my 4.875% was no longer valid.

My lender said he had been waiting for a week or two for rates to drop and he was concerned the rates weren’t going to drop any lower. Also, if we didn’t close soon, the appraisal and paperwork that had already been filled out would no longer be valid.

He quoted the current rates as follows:

• 30-year fixed – 5.375%
• 15-year fixed – 4.750%

I had a huge decision on my hands. My current mortgage is 30-year fixed at 6.25%, which comes out to a monthly payment of $1502. The 5.375% 30-year fixed has a monthly payment of $1354, a savings of $148. The 4.750% 15-year fixed has a monthly payment of $1842, an increase of $340.

I took a few hours to weigh the pros and cons of a 15-year vs. a 30-year mortgage. Obviously I will be spending significantly less on interest with the 15-year mortgage. The 30-year mortgage comes with significantly less risk since the monthly payment is $488 less.

I can afford the 15-year monthly payment as long as I don’t lose my job. I feel pretty secure with my job. If I were to lose my job, I have contacts at a few local biotech/engineering companies, which should make finding a new job easier. I also have $10,000 built up as an emergency fund, which would make losing my job significantly less disastrous. I still have the option to return to tutoring for some good money. Finally, this added risk will make me even more motivated to make money through my self-employed projects.

In the end, I decided I was a risk-taker. Why should this decision be any different? I will most likely not make another payment to Wells Fargo, which is good because they were not very kind to me. My next payment will be in September so my August “payment” will go towards covering my closing costs.

Hopefully the next installment of my mortgage refinancing journey will be my last. When I close I will update you all and also post about my updated amortization schedule and run a few numbers regarding how much interest I will be saving. It will also be interesting to see how much more equity I will be building with this new mortgage.

Post from: Personal Finance Start-Up Blog

• New Chapter in my Mortgage Refinance Journey: The Home Affordable Refinance
• Refinancing my Mortgage and my Trip to Boston
• End of January 2009 Financial Status
• Tax Information for First Time Home Buyers
• Financial Goals Update as of September 1, 2008

• Upside down? Prepare now to keep your mortgage current
• Introduction to Mortgages pt 3 of 5
• 30 Year Mortgages At 4.85%!
• How to Make a Million Dollars Starting At 25, 35 and 45
• Not paying off 30-year mortgage a good deal?

I was able to get a hold of my mortgage broker and have an interesting update about my second attempt at refinancing my mortgage. When I initially talked with this mortgage broker he said that he likes to close within 15 days, which allows him to keep his rates lower than anyone else.

Condo Appraisal

My condo appraisal went really well. It appraised at a value of $280,000. 80% of that value is $1,000 less than what I currently owe on my existing mortgage. This meant I would be able to refinance without any government programs as long as I had the $1,000 plus closing costs to cover the difference. When the 15 day mark came and went I started to worry.

Fannie Mae and Freddie Mac Troubles

I sent a few emails hoping to find out some more information. He finally returned one of my emails and recommended that I call him. When I called him I learned about the Fannie and Freddie’s new attempt to screw me over. Fannie and Freddie are taking 5-10% off the appraised value of every condo.

I’ve previously written about higher interest rates for condo owners. Apparently, Fannie and Freddie did some study that proved condo owners are more likely to foreclose.

Personal Rant

Here I am, a young home-owner trying to refinance into a lower rate, and I’m being blocked because of some study that claims condo owners are more risky. I put my 20% down at closing. I did my due diligence and purchased a reasonably priced condo. My condo’s value has not decreased much. Why am I being prejudiced against? Shouldn’t each case be different and unique. Why do other condo owners affect my mortgage refinancing?

Shouldn’t I be the only person who affects my mortgage loan? I’m the only one applying for the loan. I’m not applying with the other condo owners as partners.

My Remaining Refinancing Options

This unfortunate and prejudiced situation leaves me with two options. I can either hope Fannie and Freddie remove the 5-10% reduction of my appraised value before my rate is no longer valid. Or I can hope a “DU refinance” works to my benefit. As of right now, no condos have been closed using the DU refi program, only single family homes.

The DU refi program would allow me to refinance without PMI at the wrongfully depreciated appraised value. My broker thinks that condos aren’t getting approved for the DU refi program because of the condo association. Apparently, there is a thought that if one person in a condo association doesn’t pull his weight, it will drag the others in the association down. I feel like this is a valid concern, but it shouldn’t prevent a refinance.

I already have a mortgage. Why is it so difficult to refinance to a lower rate that will decrease my payments by $200 a month. Shouldn’t that make it less likely that I default on my payments? I will never understand this issue.

Is anybody else having refinancing issues?

Post from: Personal Finance Start-Up Blog

• The Final Chapter Of My Mortgage Refinancing Journey, Hopefully
• Walk-Thru of my New Construction Condo
• Determining Property Taxes For New Construction Condos
• End of May 2009 Financial Status
• New Chapter in my Mortgage Refinance Journey: The Home Affordable Refinance

• Understand Mortgage Options Before House Hunting
• New Home or Remodel?
• Weakon 231: How the Mortgage Industry Works (or Worked!)
• AIG: American International Group or Almost Insolvent Group?
• Time running out to refinance?

The last post about refinancing my mortgage was about the home affordable refinance program. Wells Fargo decided to send over an incompetent appraiser who did not use any comparables inside my condo building. This goes against standard condo appraisal practices. The best way to determine a condo’s value is to use the sale of a condo unit from the same builder in the same building. To make a long story short, I was unable to refinance my mortgage at 5.375% because of an appraisal that was done improperly.

The Wells Fargo mortgage specialist said that I would be able to refinance using the home affordable refinance program despite the poor appraisal. Once the program was approved, I received a packet in the mail to refinance. The only problem was that the rate was now 5.625%. After factoring in the closing costs plus the $375 I already paid for the first attempted refinance, my break even point was nearly 3 years. Since I only plan on staying in my condo for 5 years or so, it didn’t make sense to go through the hassle of a refinance.

I made two phone calls and sent one email to the Wells Fargo mortgage specialist, none of which were returned. After this experience, I will never use Wells Fargo again. I am out $375. I was sent refinancing papers without even discussing it with me. The worst part is that the specialist told me to not refinance unless the rate fell below 5.4%. I will continue contacting Wells Fargo to try and get my $375 back as I was definitely not appraised fairly. I will most likely file a report with the BBB as well.

On the bright side, I found a local mortgage broker who is offering me a rate of 4.875% with closing costs around $1500. This rate will save me $200 per month and my break even point is about 8 months, which is very low. The second appraiser, who actually used comparables in my building, found my unit to be worth $52,000 more than the other appraiser. So apparently, my condo gained $52,000 in about a month.

The bottom line is I’m refinancing my mortgage and saving $200 per month from my mortgage payment. I’m hoping to continue using this mortgage broker for future lending needs and will recommend him to all of my friends. One more interesting piece of information that I learned throughout this whole process. I have some income tax money set aside in an escrow account. When you refinance, you get your money back from the old escrow account and put some away at the closing into a new escrow account. Why aren’t you allowed to just transfer your escrow account? That doesn’t make any sense to me, but apparently that’s how it’s done.

Does anybody else out there have an interesting refinance story?

Post from: Personal Finance Start-Up Blog

• New Chapter in my Mortgage Refinance Journey: The Home Affordable Refinance
• Mortgage Refinance Update
• Current Status of Mortgage Rates and Refinancing Prospects
• New Devon Bank Rewards Checking Account and My Bank Rotation
• Refinancing my Mortgage and my Trip to Boston

• Banking Reviews: Wells Fargo's Debit and Credit Card Rewards Programs
• Oak Quarry Golf Course, Riverside, CA
• Triathlon Terms
• Best of RateLadder 3rd Quarter 2007
• Bank results week: Wells Fargo profits from Wachovia

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!

Post from: Personal Finance Start-Up Blog

• Refinancing my Mortgage and my Trip to Boston
• A Second Attempt at Refinancing my Mortgage
• Deciding When To Refinance Your Mortgage
• First-Time Home Buyer Tax Credit
• End of July 2009 Financial Status

• Should I Refinance My Mortgage?
• Tips To Survive The Credit Crunch
• Getting Out of Debt Quickly pt 4
• Suzie Says "Pay Off Your Home Mortgage"
• Obama's $275 Billion Housing Crisis Plan

Yesterday, I wrote about my trip to Boston. I am definitely not caught up on my reading, writing, responding to comments, or sleeping. Not even close, and I don’t think I will be able to do so until this weekend. I should be able to catch up completely this weekend. Additionally, I wrote about how easy it was to refinance my mortgage. During the refinancing process I was able to pull some great information about my credit score from the Wells Fargo representative.

My Credit Score

In order to refinance, Wells Fargo had to pull my credit score. My three credit scores were 751 (TransUnion), 751 (Equifax) and 746 (Experian). They use the median (middle) number as the official credit score for refinancing purposes. I pulled out the credit scores from my original mortgage from 5 months ago (October 2008): 752 (TransUnion), 723 (Equifax) and 722 (Experian). I found it very interesting that overall my credit score increased over such a short period of time.

In the 5 months between my original mortgage and today, I opened a new credit card account, slightly reduced my car loan and accrued five more months of on-time revolving credit payments. Apparently that was enough to increase my score. The anatomy of a credit score will always be a mystery and never an exact science.

Effect of a Credit Score on your Mortgage Rate

While the Wells Fargo representative was entering information for my loan application, I took the opportunity to ask some questions about my credit score and the effect it had on my mortgage rate. I was told that 740+ is the highest tier. If you are in the highest tier you don’t actually get a lower rate. If you are below 740, you start having risk factor adjustments added to your rate. In summation, there is a base rate and risk factor adjustments increase your rate as your credit score drops.

I hope this information is helpful, I found it interesting at the very least. Also, I find it very interesting that the Netherlands were able to defeat the Dominican Republic. TWICE!! I love me the WBC.

Post from: Personal Finance Start-Up Blog

• Book Review: The Money Book for the Young, Fabulous & Broke
• My First Mortgage Payment And Updated Amortization Schedule
• Credit Scores from Credit Karma are Deflated
• The Anatomy of My Credit Score
• Mortgage Rates are Dropping, but Fees are Rising

• What is the Best Credit Score?
• The 130-year fixed-rate mortgage
• Responsible Credit Score Strategies for Young Adults
• The Meaning of a Credit Score
• Credit Karma -- Free No Strings Credit Scoring

It’s been a crazy, crazy past couple of days. I found out Monday of last week that I would be traveling to Boston to represent my company at a trade show for molecular pathology. I had absolutely no time for blogging due to trade show obligations and catching up with college friends at my old stomping grounds. Now I have to get back on track with my schedule. Last week I was ahead of the game with blogging, but after that trip, I’m behind the game.

Refinancing my Mortgage

Before I left for Boston, I locked in a rate for refinancing my mortgage. Earlier I blogged about my refinancing prospects with my Wells Fargo representative. He wanted to get my break even point close to 12 months before refinancing. He said he would get back to me when the rate dropped to 5.375%. I received an email on Thursday letting me know the rates had dropped for a brief period and that I should give him a call. I called when I got back from work and after 30 minutes on the phone, I had everything set up to refinance my mortgage.

I found it very convenient to refinance through my current lender, Wells Fargo. The closing costs will be $1,600 with a rate of 5.375%. My new rate will save me $130 a month, which brings me to a 12 month break even point. Since I plan on staying at my condo for at least 5 years, this is a great deal. Additionally, the closing costs will be rolled into my new loan, so I don’t have to pay anything out of pocket. This will go a long way towards allowing me to reach my goals for 2009.

On Friday, I faxed over a few signed papers. I have to schedule an appraisal. Other than that, I will finalize in about 45 days and will be saving $130 a month on my mortgage payments in time for my June payment. Overall, this was a very pleasant experience. So much better than my experience with my original lender (who sold my mortgage to Wells Fargo). I strongly recommend discussing your refinancing options with your current lender, they were able to offer me the best deal and most likely won’t want to lose your interest payments. Is anyone else refinancing right now?

Random Thoughts

When I arrived in Boston on Saturday, it was raining. Sunday it was sunny and 60 degrees. Monday morning it was snowing. You have to love New England weather. I’ve never seen so many people so excited about cheap, free pens. People literally walked from exhibit to exhibit taking the free items without even looking at the exhibit. It was amazing.

Post from: Personal Finance Start-Up Blog

• High Interest Rate Checking Accounts
• End of July 2009 Financial Status
• End of August 2009 Financial Status
• Effect of Government Takeover of Freddie Mac and Fannie Mae on Mortgage Rates
• Understanding the Mortgage Amortization Schedule

• Trouble Ahead With Option ARM Mortgages?
• What is my Internal Rate Of Return on Prosper?
• Dale Siegel Shares the New Rules for Mortgages
• Use The First Time Home Buyer Tax Credit Now!
• Why I'm NOT refinancing My Mortgage.

Low mortgage rates have forced me to consider refinancing my mortgage despite closing not too long ago in October of 2008. I was recently contacted by a Wells Fargo representative (who current services my loan) regarding a request I made about refinancing my mortgage. He did a great job explaining the situation and current mortgage rates, and even went so far as to point me in the direction of a very interesting article. The article states that mortgage rates are dropping, but at the expense of increasing closing costs and fees.

Article: Rates are low, lending standards are really tight. Even with a great credit score you might have to pay points to secure the best rates.

Opinion: This really is unfortunate, but it’s easy to understand where this is coming from. Lenders got burned with poor lending practices, and now they are overreacting. I imagine we will see a loosening of these lending practices in the future, but probably not soon enough to obtain the low rates of the present. Let’s just hope that everybody remembers what happens when you allow subprime lending in the far-out future. We are a people that forgets rather quickly.

Article: Fannie Mae and Freddie Mac are moving towards a risk-based pricing structure by using fees. The new pricing structure will be implemented in April, but lenders began implementing them into rate sheets in mid-January.

Opinion: This fee based pricing structure is supposed to prevent unqualified borrowers from securing a loan. This added measure of tightening lending practices will prevent the people most in need of refinancing from securing a loan. I would love to be able to refinance my loan to a lower rate, but it’s not crucial for me to do so. A co-worker of mine had his house foreclosed because he couldn’t afford the mortgage. A lower rate would have certainly helped him. I don’t know of a better system, but those most in need are the ones who are going to be hurt the most.

Article: The average rate is acquired by paying 0.7 points. The decision to pay points is based on how long the borrower will be owning the property. 1 point on average lowers your rate by 0.625% to 0.875%.

Opinion: A local mortgage lender offered me the following rates: 5.375% (0 points) and 5.125% (1 point). It looks like my 1 point is not as valuable as the points described in the article. The difference in closing costs between paying 0 points and 1 point was $2,200. The difference between the monthly payments was a mere $34.85. The break even point would be 63 months or 5 years and 3 months. I’m planning on staying for about 5 years, the extra $2,200 up front to MAYBE break even is a terrible deal and that’s not even taking into account the time value of money. Definitely calculate your own break even point when deciding whether or not to pay points.

Article: Whoever currently holds your loan might provide you with the lowest fees.

Opinion: I don’t necessarily have an opinion on this, but I do have some recent experience that justifies the claim. My closing costs through Wells Fargo would have been $1,500 and at a local mortgage lender they would have been $2,100. It is important to take into account that the rates were different with no points, 5.675% and 5.375%, respectively.

Final Thoughts

The article is definitely worth a read if you’re in the market for refinancing. From what I can tell, refinancing is some what of a crap shoot. I’m going to try to stay informed, but the great quote from The Big Lebowski sums up the mortgage rate game the best, “sometimes you eat the bar, and sometimes the bar eats you”.

Post from: Personal Finance Start-Up Blog

• My Favorite Articles of the Week
• How to Invest with Lending Club
• The Final Chapter Of My Mortgage Refinancing Journey, Hopefully
• How Obama Might Affect Your Taxes And Personal Finances
• My First Mortgage Payment And Updated Amortization Schedule

• An Effective Way to Obtain A Better Mortgage Rate
• Five Key Steps to Managing College Loan Debt
• Introduction to Mortgages pt 3 of 5
• 50 Ways to Leave you Richer -- Part V
• Fed Cuts Interest Rates -- Now is the Time to Buy a Zopa CD