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Old 06-13-2012, 11:49 AM
 
Location: Vermont
530 posts, read 1,336,751 times
Reputation: 530

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I am in the process of refinancing my home under HARP 2.0. The only debt I have is my mortgage payment of $1043 monthly, which includes taxes, PMI and insurance. I am on Social Security and make $1509 a month. According to my calculations, I have a debt-to-income ratio of 69%. My credit score is 791. This is a Fannie Mae mortgage.

So far no lender, including the one who services my current loan, will consider me for a HARP refi, although I qualify in every way with the exception of the debt-to-income ratio. I was contacted by a lender last week that said he thinks he can do it. Over a process of a few days, he found a servicer willing to transfer the PMI, and two days ago we completed the application by phone. The lender said it would be tight, since he calculated my debt-to-income ratio at 45.7%, but that he thought it would go through and he would contact me yesterday.

I didn't hear back from him and today he said he is waiting for a call-back from the bank that will actually provide the loan. I guess he is a broker (ENG Lending). I emailed him and asked how he arrived at that debt-to-income ratio but he has not replied.

I haven't given any money, but did send lots of documents to him. My question is two-fold: Am I incorrectly calculating my debt-to-income ratio? Does a broker get paid for submitting a HARP application even thought they are aware that the debt-to-income ratio will result in a denial? I just don't understand what possible advantage there would be for the broker to submit the application if they already know it will not meet the income guidelines.

The refi deal was great...4.125% for 30 years and $3200 closing costs, but I never received any kind of breakdown of those costs, and was never asked to pay money to lock in the rate....sort of makes me think that once again I am a fool.
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Old 06-13-2012, 07:03 PM
 
Location: Baltimore, MD
5,283 posts, read 5,950,987 times
Reputation: 10788
Quote:
Originally Posted by jenny1951 View Post
I am in the process of refinancing my home under HARP 2.0. The only debt I have is my mortgage payment of $1043 monthly, which includes taxes, PMI and insurance. I am on Social Security and make $1509 a month. According to my calculations, I have a debt-to-income ratio of 69%. My credit score is 791. This is a Fannie Mae mortgage.

So far no lender, including the one who services my current loan, will consider me for a HARP refi, although I qualify in every way with the exception of the debt-to-income ratio. I was contacted by a lender last week that said he thinks he can do it. Over a process of a few days, he found a servicer willing to transfer the PMI, and two days ago we completed the application by phone. The lender said it would be tight, since he calculated my debt-to-income ratio at 45.7%, but that he thought it would go through and he would contact me yesterday.

I didn't hear back from him and today he said he is waiting for a call-back from the bank that will actually provide the loan. I guess he is a broker (ENG Lending). I emailed him and asked how he arrived at that debt-to-income ratio but he has not replied.

I haven't given any money, but did send lots of documents to him. My question is two-fold: Am I incorrectly calculating my debt-to-income ratio? Does a broker get paid for submitting a HARP application even thought they are aware that the debt-to-income ratio will result in a denial? I just don't understand what possible advantage there would be for the broker to submit the application if they already know it will not meet the income guidelines.

The refi deal was great...4.125% for 30 years and $3200 closing costs, but I never received any kind of breakdown of those costs, and was never asked to pay money to lock in the rate....sort of makes me think that once again I am a fool.
First, is the monthly amount given above for your current mortgage? Second, Social Security benefit (non taxable income) is grossed up 125%, so your income would be calculated at $1886. Perhaps your new monthly payment would yield a debt to income ratio of 45.7% ?

BTW, I'm a bit stunned. Why aren't you applying for a modification that that could yield an interest rate as low as 2%?
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Old 06-13-2012, 07:41 PM
 
Location: Vermont
530 posts, read 1,336,751 times
Reputation: 530
Quote:
Originally Posted by lenora View Post
First, is the monthly amount given above for your current mortgage? Second, Social Security benefit (non taxable income) is grossed up 125%, so your income would be calculated at $1886. Perhaps your new monthly payment would yield a debt to income ratio of 45.7% ?

BTW, I'm a bit stunned. Why aren't you applying for a modification that that could yield an interest rate as low as 2%?
Yes, my current mortgage is $1043. 87 a month. I did apply for a modification, but the bank told me I had to stop making payments to continue through that process. I didn't want to destroy my credit, so I withdrew my application. Honestly, I don't see me living in this house beyond 2-3 years, not only because of affordability but because I just cannot do the maintenance alone any longer. The refi was a way to lower the payment so that I could rent it for what I owe...I am very close now, but not quite. Maybe next year will be better and I can sell it.

I did hear back from the lender. They sent me a document package that included a form to sign that makes me responsible for any appraisal, even though (I was told) this loan doesn't require an appraisal. I have yet to receive a GFE or any rate confirmation, so I don't want to sign anything. I am wary...too good to be true feeling. Even if they grossed up to 125%, I still am at a 55% debt to income ratio. They told me the ratio is based on the current payment, not the new one, which is $200 a month less.
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Old 06-13-2012, 08:55 PM
 
Location: Baltimore, MD
5,283 posts, read 5,950,987 times
Reputation: 10788
Well, the lender that told you that you had to stop making payments before qualifying for HAMP is wrong. If you can show you are at risk of "imminent default" (i.e. insufficient liquid assets NOT including retirement funds) then the lender MUST evaluate your application using the NPV, etc. Yes, I've heard of lenders telling borrowers that they must first miss a few payments.

I intend to ask my lender to evaluate my application for imminent default. If the automated appraisal comes back too high, I will probably ask for an exterior or interior appraisal. If I can obtain the mod, then good for me. It will be for substantially less than it would cost me to rent another place in my community. I may end up moving anyway, but if so, I'll deal with it at that time. I cannot justify continuing to rob my retirement funds to pay a mortgage with a 6.375% rate. I put 20% down and invested about $100,000 in improvements (new wiring, plumbing, etc.) before the economy tanked. No 2nd loan, no home equity line of credit. I can't sell it and I can't refi because my income is now too low. I'm 60 years old and all of my remaining funds are in retirement accounts (protected from creditors including the lender). I am self employed so it will be damn hard for a lender/creditor to garnish wages when I don't pay myself wages. Finally, I don't care about the credit ding. I may be a bit slow at times, but I'm not stupid. IOW, I'm over it.

I'm sorry you are having a difficult time getting the refi. It is ironic that your lender apparently thinks you can afford to continue to pay your current monthly payment, but your debt-to-income is too high for a lower payment. Gotta love it!

Added via edit: Just realized your new mortgage would be about 45% of your adjusted income.

Last edited by lenora; 06-13-2012 at 09:03 PM.. Reason: added note
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Old 06-13-2012, 09:55 PM
 
Location: Bay Area
1,789 posts, read 2,905,694 times
Reputation: 1277
Quote:
Originally Posted by lenora View Post
Well, the lender that told you that you had to stop making payments before qualifying for HAMP is wrong. If you can show you are at risk of "imminent default" (i.e. insufficient liquid assets NOT including retirement funds) then the lender MUST evaluate your application using the NPV, etc. Yes, I've heard of lenders telling borrowers that they must first miss a few payments.

I intend to ask my lender to evaluate my application for imminent default. If the automated appraisal comes back too high, I will probably ask for an exterior or interior appraisal. If I can obtain the mod, then good for me. It will be for substantially less than it would cost me to rent another place in my community. I may end up moving anyway, but if so, I'll deal with it at that time. I cannot justify continuing to rob my retirement funds to pay a mortgage with a 6.375% rate. I put 20% down and invested about $100,000 in improvements (new wiring, plumbing, etc.) before the economy tanked. No 2nd loan, no home equity line of credit. I can't sell it and I can't refi because my income is now too low. I'm 60 years old and all of my remaining funds are in retirement accounts (protected from creditors including the lender). I am self employed so it will be damn hard for a lender/creditor to garnish wages when I don't pay myself wages. Finally, I don't care about the credit ding. I may be a bit slow at times, but I'm not stupid. IOW, I'm over it.

I'm sorry you are having a difficult time getting the refi. It is ironic that your lender apparently thinks you can afford to continue to pay your current monthly payment, but your debt-to-income is too high for a lower payment. Gotta love it!

Added via edit: Just realized your new mortgage would be about 45% of your adjusted income.
this seems so classic to what i keep seeing and hearing. i'm in a similar boat and i contacted homeaffordable.gov thinking that they help. my lender had already refused to refinance a few years back. so i called these .gov people and after going through the whole thing, the guy says well good luck. i thought they actually helped you through the process rather than just giving advice that i didn't particularly need. he agreed that i do look like imminent default, but i'm not even going to bother trying to refi until i've actually been late. this "you must be behind" is the usual story and just one of the many hoops you are supposed to go through with the end result being no different - foreclosure. .gov did say that things have changed in the last two years, but he also said it was a 25% rate of people that were allowed a modification and now it is SLIGHTLY higher. great! i also am planning to move but it all depends on how long this drags on. hopefully it will be awhile so i can actually recover some of my losses and have the money to move!
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Old 06-14-2012, 05:05 AM
 
Location: Vermont
530 posts, read 1,336,751 times
Reputation: 530
Quote:
Originally Posted by lenora View Post
I intend to ask my lender to evaluate my application for imminent default. If the automated appraisal comes back too high, I will probably ask for an exterior or interior appraisal. If I can obtain the mod, then good for me. It will be for substantially less than it would cost me to rent another place in my community. I may end up moving anyway, but if so, I'll deal with it at that time. I cannot justify continuing to rob my retirement funds to pay a mortgage with a 6.375% rate. I put 20% down and invested about $100,000 in improvements (new wiring, plumbing, etc.) before the economy tanked. No 2nd loan, no home equity line of credit. I can't sell it and I can't refi because my income is now too low. I'm 60 years old and all of my remaining funds are in retirement accounts (protected from creditors including the lender). I am self employed so it will be damn hard for a lender/creditor to garnish wages when I don't pay myself wages. Finally, I don't care about the credit ding. I may be a bit slow at times, but I'm not stupid. IOW, I'm over it.

I'm sorry you are having a difficult time getting the refi. It is ironic that your lender apparently thinks you can afford to continue to pay your current monthly payment, but your debt-to-income is too high for a lower payment. Gotta love it!

Added via edit: Just realized your new mortgage would be about 45% of your adjusted income.
I am in almost the same boat! 60 years old, but just retired and get SSDI (Rheumatoid Arthritis) and living on that alone. Only $16k left in savings. Bought the house for $135k in 2007, but didn't put 20% down (only put $16k down), 6.375 30 year fixed, at least $40k in improvments. No second lien, no credit card debt, no car loan debt, and yes you are so right. I struggle to make the payments but always do, but they won't lower it.

I have a friend 8 months into the modification app and no luck. If I was able to stay here for years and years, I would maybe just stop paying, go for the mod, and hope for the best. But that credit hit forecludes the possibility of renting again. I am only underwater by around $10k, so I just pray next year will be better. Or maybe a HARP 3.0 will come out (they are discussing it) because HARP 2.0 still has too many barriers to refinancing,

I found a very realistic article on the HAMP program that backs up what the HUD counselor told me: that my income is so low that the bank will never really approve a modification:

Portland Mortgage News - ENG Lending NW - Hamp Modifications
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Old 06-14-2012, 11:29 AM
 
Location: Bay Area
1,789 posts, read 2,905,694 times
Reputation: 1277
Quote:
Originally Posted by jenny1951 View Post
But that credit hit forecludes the possibility of renting again.
i don't believe that is true. nobody i know has had trouble renting. so many people in this situation that most landlords have to overlook that if they want to have renters. i usually can't rent with my pets, so at worst i'm hoping to just pay cash for a mobile, leaving only the space rent to pay.
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Old 06-14-2012, 11:34 AM
 
Location: Baltimore, MD
5,283 posts, read 5,950,987 times
Reputation: 10788
Quote:
Originally Posted by jenny1951 View Post
I am in almost the same boat! 60 years old, but just retired and get SSDI (Rheumatoid Arthritis) and living on that alone. Only $16k left in savings. Bought the house for $135k in 2007, but didn't put 20% down (only put $16k down), 6.375 30 year fixed, at least $40k in improvments. No second lien, no credit card debt, no car loan debt, and yes you are so right. I struggle to make the payments but always do, but they won't lower it.

I have a friend 8 months into the modification app and no luck. If I was able to stay here for years and years, I would maybe just stop paying, go for the mod, and hope for the best. But that credit hit forecludes the possibility of renting again. I am only underwater by around $10k, so I just pray next year will be better. Or maybe a HARP 3.0 will come out (they are discussing it) because HARP 2.0 still has too many barriers to refinancing,

I found a very realistic article on the HAMP program that backs up what the HUD counselor told me: that my income is so low that the bank will never really approve a modification:

Portland Mortgage News - ENG Lending NW - Hamp Modifications
Argghh. I'm guessing you already realize your back end debt-to-income ratio is the same as your front end. (Given that you have no other relevant debt.) Is your savings in a retirement account? Given your numbers, it looks like you are in a better position for a modification than I am. Check out this site and run your numbers. (Even if you have no intention of modifying. This will be an eye-opener.)
https://checkmynpv.com/

I will give the lender one chance only. I refuse to play games. (I've heard many lenders will not speak with you if you retain an attorney. WTH? I don't know what my lender will do, considering I AM an attorney.) If I receive a denial (and I'll insist on a written denial with an adequate explanation), I'll stop paying and let the home go into foreclosure. It may take 2 or 3 years, whatever. I'm not going anywhere until my deed is transferred to someone else.

P.S.: Most folks who have gone into foreclosure have not had difficulty finding a rental. YMMV.
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Old 06-14-2012, 11:46 AM
 
Location: Vermont
530 posts, read 1,336,751 times
Reputation: 530
I used this tool once before, with the same results:

Based on the information you provided your mortgage may not pass a HAMP NPV evaluation and you may not be eligible for a HAMP modification. Be sure to save a copy of the information below and share it with your mortgage servicer to discuss options available to you.

Right now, I am holding tight as long as I can. It's tempting to do a strategic default, but as yet the Mortgage Debt Relief Act has not been extended beyond 12/2012. I will see if that is extended before I make a decision to stop paying.
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Old 06-14-2012, 01:09 PM
 
Location: Vermont
530 posts, read 1,336,751 times
Reputation: 530
Well I may have been wrong. I just got a call from the bank that I do not have to sign the appraisal form, since HARP does not require one. Nor do I need to pay any fee to lock in the rate, and the problem with no GFE was I clicked the wrong button on the electronic documents page. So we'll see how this goes. I'll let you know if it is successful or not. They did gross up my SS, as Lenora mentioned, and also the DTI is based on the new loan, so I was wrong there.
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