Earlier this week, I wrote about yet one more government program which is supposed to help distressed homeowners . But what about the other group of homeowners?  Those who have jobs, good incomes, have been making their mortgage payment and God forbid, may even have a little money in the bank.  I have several clients who currently owe more than their home is worth.  They don’t want financial aid; all they want is the opportunity to refinance in order to take advantage of today’s lower interest rates. 

Unless you have been hiding under a rock you know housing values have dropped. Lowering this other group of homeowner’s  interest rate and their monthly payment might make them a little bit happier about doing the right thing… paying off their over inflated loan.

Supposedly there is a new program to help homeowners who aren’t asking for financial assistance, just a lower interest rate. 

The hype: “In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain 'underwater' non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.”

But remember these homeowner’s aren’t asking for their loan balance to be discounted, just to have today’s lower interest rates. And no one seems to be ready to give them the lower rate.  

And the reality:

Client #1, Jane Doe
Details:
Purchased condo in 2007 for $379,900 – Down Payment $79,000 (over 20%)
Current Comps range from $224,900 - $260,000
Approximate current loan balance $287,000

Here’s Jane’s story, The CITIMORTGAGE ODYSSEY:

First, after a one-hour wait for customer service (middle of the day), I gave up.

Another day, I was connected.  The first questions they ask include “Do you have an account with Smith Barney?” – a “yes” answer gets you connected to a Smith Barney agent who shortly tells you that the loan-to-value ratio is too high, and they aren’t interested.  (Which left me wondering: did Citimortgage not understand why I was calling in the first place?)

A third call to Citimortgage.  Another “Do you have an account with …?”  It is clear that the people handling calls are merely following a script and have no clue what they are doing.  I reiterate that I am not interested in talking to Smith Barney, not a candidate for a conventional refi.  I get kicked to customer service.

Customer service kicks me to the “mortgage assistance program.”  An incredibly rude person named Tanisha asks if I am having trouble paying my mortgage, if I have lost income, or if my employment situation has changed – am I in financial trouble?  I say “no.”   The rudeness increases: “this program is for people who are in financial difficulty.”  “If you aren’t having financial difficulties, you don’t qualify.”  I protest …

Customer service again.  Yet another number – this time, loan modification.  A speech about “the loan investors” – are they Fannie Mae or Freddie Mac?  This is a new issue to me.  I am not sure I understand why this is relevant.  I am told “These are not our rules; they are Freddie Mac’s rules.  We cannot refinance anyone with a loan-to-value ratio above 90%.”  I ask: well, what if I refinance that part of it and pay you the difference.  I am told that I’d be no better off than I already am.  “Historically speaking, you still have a good interest rate.”  And “You’d have to pay an appraisal fee and we’d add 1% to your rate because you don’t have any equity in your home.”

Sigh……

Client #2, John Smith
Details: Purchased home in 2006 for $735,000
Down Payment $36,750 (5%)
Approximate current loan balance $665,000
Current Comps range in the $625,000 - $650,000 range

John's story, The Wells Fargo Journey:

The gist with me is over the last 4 months, they've given me different data on refinancing each time I call.  Once they said they are not refinancing unless the CLTV ratio is lower than 60%.  Another time they said 70%.  Another they said 80%, and on 9/9/10, they said 90%.  It keeps changing with the rep you get.  Although I was happy with the last rep who said 90% (so I got his contact info) , he quoted me a rate of 5.125%, which isn't market, so they're actually adding a premium to do a 90% refinance.

My conversation with them on asking if they're participating in the government short refinance program went like this:

Me:                                     Are you participating in the federal short refinance program?
Representative:              Yes, you are able to short sell.  That's correct.
Me:                                     I'm not asking to short sell.
Representative:              Thank you for calling.  Have I answered all of your questions?
Me:                                    No.
Representative:              Ok.  Thank you for calling.