Best Way to Refinance a Problematic Mortgage

by Cate in Spokane, WA and by Carol in Hanover, PA

Ask Kate how to refinance your problematic mortgage: Cate can't complete her refinance because the bank who is dodging her calls won't respond with a pay-off. Carol's first and second mortgages must be paid off by 2015. But fallen real estate values after building her house now require for her to pay mortgage insurance. Her only choice is lender paid mortgage insurance (LPMI) and she wants to know what I think of that option.


Dragging Out Pay off Request and Dodging Our Phone Calls

By Cate in Spokane, WA
Ask Kate: Dragging Out Pay off Request and Dodging Our Phone Calls

Hi Kate,

It has been almost two months since we began our refinance process. At first, our lender told us we had to wait for the pay off amount to come through from the bank that holds our current loan.

We waited the time they asked and then some. It wasn't until we asked them if it was normal for it to take so long that they began contacting our current mortgage company.

Now the bank is saying that it is due to a bankruptcy from several years ago that is causing the problem. However, our house was not included in it.

We did find out that the bank is in the midst of lawsuits. They are dodging phone calls and not responding to messages from us or our lender.

So do you have any idea why this might be happening and what can we do about it?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Dragging Out Pay off Request and Dodging Our Phone Calls

Hi Cate,

It sounds to me as if the problem is not with the originating lender who is attempting to refi your mortgage but with the company that currently holds your note.

But please correct me if I'm mistaken by adding a comment! (See comment link near the end of this page.)

It might interest you to know I occasionally ran across this dilemma while originating mortgages. Truthfully, it would absolutely fry me! Talk about being taken hostage.

Involving Your Loan Servicer in Your Refinance

Here's what I'd do. I'd plead with loan servicing... Yours is the last action needed to close my refinance. Will you assist me by providing the pay-off?

9 out of 10 times, asking for help in this manner successfully invoked a positive response. But when that didn't work, I'd call the nearest local office. There's just something about being geographically close that establishes a personal connection, including a sense of obligation.

By the way, this is why I still encourage finding a near-by lender available for a face-to-face meeting vs shopping on-line.

Engaging Your Originator in Your Refinance

But if it's the representative originating your refinance who's dodging your phone calls, my advice is to cut your losses and dump that lender faster than is humanly possible.

Originating a loan is tedious. But it's a Herculean task to close a refinance... without fire drills. Refinancing is plainly not the time to be involved with a dodgy loan originator or lender.

Best wishes for closing your refinance smoothly,

Ask Kate

Need to refinance, Offered LPMI? Is this a good idea?

By Carol in Hanover, PA
Ask Kate: Need to refinance, Offered LPMI? Is this a good idea?

Dear Kate,

Here are a few basics about our loan situation, Built house 2009, Construction loans converted to 1st Mortgage and 2nd Line of Credit.

Both are ARM loans to expire 2015. Bought land at high market value, market dropped when we were ready to build.

Have been trying to refinance for past 2 years. Cleaned up debt of credit cards due to purchasing doors, windows, paint, lighting not on the loan.

Problems with Timeshare property that has us listed with Foreclosure but never any paperwork saying such, Aug. 2009.

Still can not refinance without PMI, except for a loan offered to me with lender paid mortgage insurance (LPMI).

Our current mortgage is with Fulton Bank and they are NOT Fannie Mae or Freddy Mac. Any suggestions?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Need to refinance, Offered LPMI? Is this a good idea?

Hi Carol,

I looked up Fulton Bank but could not find any mention of loan modification on their website. That's too bad because modifying your mortgage would not introduce MI into your payment if it wasn't currently required.

Looking Ahead to Refinance by Further Addressing Credit

As I see it, 2015 (your mortgage expiration date) is fast approaching. So while this should not throw you into a panic, I also would not wait until the last minute to begin the refinance process.

One thing you could be working on further is your credit. Have you tried disputing the Timeshare problem? I am not familiar with specific laws regarding Timeshares but I can't imagine the government allows foreclosure without having given proper written notice.

Here are the three major credit bureaus where disputes can be reported. Keep copies of all correspondence and include account numbers for future verification.

Create a Mortgage Options Spreadsheet

But apart from repairing credit, I think you are at the crossroads of List Your Options and Pick Your Poison where you will need to choose the best available financial route.

To aid your decision-making, I'd create a spreadsheet (or make a list) with columns for lender, monthly payment, loan balance, interest rate, mortgage insurance, type of program, closing costs and fees, and (drum roll) inferior terms such as prepayment penalties.

This will help you compare your options.

Look into loans with PMI, LPMI, including FHA refinancing which charges both upfront and monthly mortgage insurance but is friendlier to borrowers with credit issues. (Your loan balance may be too high to be eligible for FHA though.)

Even though PMI and LPMI can be costly, it's still better than losing your home as long as you can afford the new mortgage payment.

Don't Give Up Easily on Mortgage Modification

Lastly, even though Fulton Bank is not required to participate in HAMP (because it's not a Fannie or Freddie lender), you might still try negotiating an in-house modification.

Go to Can I Modify My Own Mortgage for my recommendations before you initiate the call to them.

Whatever you do, leave yourself some wiggle room. Don't get boxed into a hasty financing decision because you waited until the last minute to pay off your two mortgages.

Very best wishes,

Ask Kate


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