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jerry3 · Joined: 15 Oct 2009 Posts: 2 1.77 Dollars($)

I have a conventional loan at 6.75% with a $170/month PMI payment. I cannot refi my loan because I have very little equity. My lender says that I cannon take advantage of Fannie Mae Home Affordable Refi program because I have PMI.

I can, however, refi into an FHA loan at 5.0%. I know FHA has the upfront PMI that's added into the loan and also a small monthly PMI payment.

Should I refi my conventional into an FHA to take advantage of the lower rate? Or should I keep my current loan until I have enough equity someday to refi and hope that rates are still low?

jameshogg · Posted: Thu Oct 15, 2009 9:16 pm Post subject:

Hi jerry,

Rather than expecting that the rates would be low for a longer period of time, it is better that you refinance your loan and take advantage of the lower rates now. However, you should refinance the loan only if you are planning to stay in the property for the next 8-10 years. This will help you in offsetting the closing costs that you will pay for a refinance.

Thanks

chrisburns · Posted: Fri Oct 16, 2009 6:37 am Post subject:

Actually I'm sure you can find a lender that may be able to help you with a conventional refi. There is no restriction on the home affordable refi with private mortgage insurance. Your PMI is to remain the same as it is now and allow you to take advantage of the lower rates today as long as you have made your last 6-12 payments on time.

jveenstra · Posted: Fri Oct 16, 2009 9:06 am Post subject: Refinance

If your existing mortgage is owned by Fannie Mae or Freddie Mac your refinance should be able to be done by your existing lender---whomever you mail your payment to now.

If your existing mortgage has PMI, then there are some advantages to doing the refinance with your existing lender.

In order for us to help answer your question, we would need to know who presently services your mortgage and with which PMI company the PMI is with. If you do not know the PMI company, call the 800 customer service telephone number and ask them. Also ask them if your loan is a Fannie Mae loan. It is unusual that the existing servicer can not refinance due to PMI unles there is something unusual about the PMI company guidelines for refianncing.

If your existing loan is not owned by Fannie Mae or Freddie Mac, it can not be done by them or any lender if the value of the home is not high enough. Then and FHA loan can and should be done at today's rates.

We do not know your mortgage balance. The higher the mortgage balance, the more advantageous it will be to refinnce.

jerry3 · Joined: 15 Oct 2009 Posts: 2 1.77 Dollars($)

My mortgage company is Amtrust. My mortgage is backed/owned by Fannie Mae. However, Amtrust told me that they will not allow me to refi bucause I have PMI. I have a 780 FICO, secure job with state gov and about 8k equity in my home. My principal is $209k and my home will appraise for around $215-218k. A company called Box Home Loans also told me that PMI prevents me from taking advantage of the Home Affordable Program. I don't understand why I can't just transfer my current PMI to a new loan...

Jerry

gmakerley · Posted: Fri Oct 16, 2009 11:23 am Post subject:

apparently neither of these two companies you cited knows the rules. go figure...

or is it that they are ignoring the rules? oh well.

as for your original question, if all else fails, i'd suggest that going with the fha loan may well be a good idea. with mortgage insurance a deductible expense these days, it's far less heinous to borrowers (not that it ever was). how could i say that? i was an mi underwriter!

Posted: Fri Oct 16, 2009 11:45 am Post subject:

I’d make another pass at AmeriTrust. Mention “DU Refi Plus” to them. Many, but certainly not all, FANNIE loans are covered. Usually disqualification is “credit enhancement” but I doubt if AmeriTrust was packaging this way.

Most MI companies will try to transfer coverage but biggest advantage would be if you have no MI “in force” (no MI would be required on the refi). That’s a long shot since I guess you’re far from the 78% cut off. See Fannie Mortgagee letter 09-04 for more info.

You want to get the lower rate and either no or reduced MI. FHA is likely your best shot – monthly MI is 55 basis points and the increased borrowed amount for UFMIP is not a killer compared with the $170/month you’re paying now.

Posted: Fri Oct 16, 2009 11:49 am Post subject: Refinance

Amtrust was one of my favorite lenders in years from 2003 to 2007. I have no idea why they can not do it, but, I believe them.

You appear to be a little tight on the house value versus loan amount. The principal balance of $209,000 is 95.8% of the value at $218,000. That leaves a little room to raise the loan amount to cover the closing costs and prepaids, which would be necessary to keep you from paying the closing costs out of pocket.

If you can do this refinance with an FHA mortgage you should lower your monthly principal and interest payment by about $220 or more and you should lower the monthly PMI payment (now FHA MIP) by about $83. Total monthly savings would be about $300+ monthly.

To me that means do it if you can.

Posted: Fri Oct 16, 2009 11:54 am Post subject: Refi

It's AmTrust, not Ameritrust

Guest

I own home financed through a conventional loan for 369,000. I was a countrywide mortgae customer which was boughtout by Bank of America. I have been struggling with my payments but Bank of America says I don't qualify fro a loan modification. My mortgage payment is 4429 with a 805 PMI. my taxes just went up and I am drowinging. Can anyone provide some guidence. My loan is a fannie mae loan...I checked the website.

Guest

Jerry, regarding your scenario I second the motion for an FHA refi (or VA, if you qualify). With your LTV over 95% the pricing of a Refi Plus loan would not be as favorable for low closing costs, and even worse for 95-97% LTV, assuming a Refi Plus is available.

With FHA you can do 97.75% LTV plus the up front mortgage insurance premium in the loan with a better rate than a conventional loan. You have room for to add about 2% closing costs to the loan before having to pay out of pocket to close, and that should be enough. With VA there's no monthly MI, but the funding fee is 2% financed into the principal.

Your current rate of 6.75% plus MI is effectively 7.75%. At the close today rate prices on FHA 30-yr fixed rate loans were actually a little better than for conforming conventional loans. Locking today you could have gotten 4.75% with low closing costs or 4.875% with lower closing costs. Assuming a rate of 4.875% plus the monthly MI rate of 0.55%, that's an effective rate of 5.425%. The additioonal 1.75% financed up front mortgage insurance premium would average out to about 0.4% over 5 years, so an effective rate of about 5.8%. Your savings of almost $4,000/year would quickly repay closing costs.

The possible downsides with FHA are requirements for the property. You must not have any lead paint or asbestos present. If you don't have city water and sewer, there are well and septic inspections. City hookup is required, if reasonably available.

Dan Stephens
Mortgage Banker

[Contact details deleted as per forum rules. Thanks.]

Guest

Lorena A,
You said you've been struggling with payments. I'm wondering if you've missed any payments? That can really hurt your credit score and credit qualification. But what's your current interest rate? A payment of $4,429 plus $805 for PMI on a loan of $369,000 is incredibly high. A payment of $4,000 on a loan of $369,000 computes to an interest rate over 12% on a 30-year loan. Does the payment include penalties and arrearages? What's the escrow payment?

If you haven't missed any payments, or only one in the last year, and you meet other credit requirements and meet the debt ratios, you probably qualify for a refinance instead of a modification. Have you tried applying for a refinance any place?

Dan Stephens
Mortgage Banker

[Contact details deleted as per forum rules. Thanks.]

Guest

I have a conventional loan with an interest rate of 6.5%. Unfortunately, I have no equity and the value of the house is now half of what I owe, ($217,000). I am current on my payments but recently took a big pay cut at work. The loan originated through WAMU but has since been taken over by Chase. They say I dont qualify for a modification to lower my int. rate. Is there anything I can do?

gmakerley · Posted: Sat Aug 07, 2010 7:55 am Post subject:

Demi, you're not going to be qualified for a modification if your loan is in a current status, regardless of your value or employment situations. The fact that value has plummeted in this case pretty much eliminates a refinance. You'll be considered as in "imminent default" if your account reaches a status of not quite 60 days delinquent; and your lender would then look more favorably at a modification possibility.

That is no guarantee that you'll receive the modification requested; there are still qualification guidelines to meet.

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