U.S. CitiesCity-Data Forum Index
Covid-19 Information Page
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
Old 12-22-2011, 07:24 AM
 
57 posts, read 135,413 times
Reputation: 75

Advertisements

My next door neighbor recently refinanced their house from 30yr/5% to 30yr/4.25% and received credit from mortgage broker of about 5k. They were eligible for a lower rate 30yr/3.875% but choose to select the higher rate due to the credit that was being given to them.

Then he tells me jokingly that they will refinance again in a couple of months to get the lower rate (30yr/3.875%) at no cost.

I was confused by the logic they were using but it didnt sound right to me. Would there be laws that prevented such borderline-fraud refinancing?

Can anyone knowledgeable on this subject care to shed some light?
Rate this post positively Reply With Quote Quick reply to this message

 
Old 12-22-2011, 07:32 AM
 
Location: Plano, Texas
1,675 posts, read 6,652,230 times
Reputation: 694
What fraud is being committed? A homeowner can refinance their mortgage as often as they like.


I have refinance many clients several times. The logic is very simple, a few months ago no cost refinances where in the 4.5% range..now rates are lower, and no cost loans are even lower. Any consumer can choose a no cost loan option. On a no cost loan, there are closing costs. The only thing that differs is who pays them. On a no cost loan, the consumer chooses a higher interest rate and the lender pays the closing costs for them. That same consumer could choose to pay the closing costs and secure a lower rate if they would like.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 12-22-2011, 07:46 AM
 
Location: Mount Laurel
4,186 posts, read 10,275,151 times
Reputation: 3499
Anyone can refinance as often as they like (if they qualify) and it's actually good for everyone. Refinancing almost always incur cost (appraisal, application, underwritting, title insurance) so money for those parties.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 12-22-2011, 07:53 AM
 
57 posts, read 135,413 times
Reputation: 75
Quote:
Originally Posted by VictorBurek View Post
What fraud is being committed? A homeowner can refinance their mortgage as often as they like.


I have refinance many clients several times. The logic is very simple, a few months ago no cost refinances where in the 4.5% range..now rates are lower, and no cost loans are even lower. Any consumer can choose a no cost loan option. On a no cost loan, there are closing costs. The only thing that differs is who pays them. On a no cost loan, the consumer chooses a higher interest rate and the lender pays the closing costs for them. That same consumer could choose to pay the closing costs and secure a lower rate if they would like.
So by the above logic, they can technically earn 5k by refinancing twice and get the lowest rate around ~3.875% ?

Have the cake, eat it too and take one home as well!

So if they had chosen to go from 30yr/5% directly to 30yr/3.875% they would not have gotten any credit from the broker due to the lower rates. By doing this back to back, they get the benefit of both?

So this 5k they they got credited with during the 1st refinance, someone has to bear that expense? Its either the mortgage broker or mortgage lending company?
Rate this post positively Reply With Quote Quick reply to this message
 
Old 12-22-2011, 07:57 AM
 
Location: Plano, Texas
1,675 posts, read 6,652,230 times
Reputation: 694
Quote:
Originally Posted by drobdrob View Post
So by the above logic, they can technically earn 5k by refinancing twice and get the lowest rate around ~3.875% ?

Have the cake, eat it too and take one home as well!

So if they had chosen to go from 30yr/5% directly to 30yr/3.875% they would not have gotten any credit from the broker due to the lower rates. By doing this back to back, they get the benefit of both?

So this 5k they they got credited with during the 1st refinance, someone has to bear that expense? Its either the mortgage broker or mortgage lending company?

The end investor who buys the mortgage backed security that the loan was bundled in ends up paying the expense.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 12-22-2011, 08:41 AM
 
Location: Austin
7,205 posts, read 19,265,947 times
Reputation: 9818
Has he explained how he expects to get the 3.875% without paying anything? That's basically the par rate and he's not going to get any lender credits at that rate so he would be out of pocket the expenses, unless he's getting that rate with a 15 year mortgage.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 12-22-2011, 07:21 PM
 
Location: Wake Forest, NC
835 posts, read 3,764,402 times
Reputation: 649
I have closed many loans at 3.99% with no closing costs in the last 6 months. You have to catch a valley but not far off from 3.875%. During these valleys I got a couple of clients 3.875% with no closing costs as well- the stars aligned with a high conforming loan amount, low loan to value(under 60%), and a lender incentive for higher conforming loan amounts.
Rate this post positively Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Similar Threads

All times are GMT -6.

© 2005-2021, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top