Worst Screw-ups of Home Refinancing

So, you've heard all this great stuff about refinancing your home mortgage? You're not alone. Numerous lenders are looking for the business they lost during the housing bust by taking advantage of low mortgage rates currently in place to lure homeowners away from their higher-rate mortgage. You may think that you're getting a great deal, four points lower than you were paying before, a monthly payment reduction of several hundred dollars, or even a hundred thousand dollars off the final cost of your loan at the end of its term. Great deals abound, but where should you start? One of the annoying advertisements on the side of your screen- perhaps a cute young blonde jumping up and down with cash in her hands promising home mortgage refinancing rates as low as 3.9%? What about the emails that seem to come from no where at all promising equally desirous terms and payment reductions. Where was all this when the bubble burst?

If you're having trouble making your mortgage payment now, there isn't a lot of liklihood that even your current mortgage lender can help you out. There are rules to stand by, and they don't break them, particularly with so many watchdog groups looking right down their necks. Here are the rules:

One, you have to have made all your payments on time for the past 12 months.

This is one of the unbreakable ones that, if you try to break, someone's going to just shake their head sadly at you when you ask them for a great mortgage refinance rate. Any mortgages backed by the federal government, e.g. Freddie Mac, require a history of on-time payments in order to be qualified for a "streamlining" of your home loan, regardless of your current situation. If you've been out of work for three months, and missed three payments, they won't refinance you. That's it, end of story. The banks simply won't take the chance on a mortgage loan that, even if it is refinanced, most likely will be the subject of foreclosure in the near future, anyway.

If you have a VA-backed mortgage, the same rule applies.

Avoiding the bad guys

There are some pretty unscrupulous characters lurking in the mortgage refinance business. Not only do they look for ways to trick you into long, drawn-out contractural obligations to your mortgage payment, they'll have no problem with tossing you out on the curb if you can't pay up. The very worst of these soul-killing dredges on society are using Obama's "Making Home Affordable" plans. Yes, these people exist, even though they should rightly be buried to their necks in a fire ant hill. One of the scams is a very basic one, that calls for you, the homeowner to pay an up-front fee for refinancing to a lower interest rate. Often, the fine print states that the up-front fee is not refundable, but the large print happily states that the fee is offset by the fact that they can hold off your mortgage payments for two months after you sign up with them. It isn't entirely untrue, but you'll never qualify for their rate reduction, and then you'll be out the up front fee, regardless of whether you're approved or not. The company may also ask for you to sign over your title, which essentially becomes what is called an "equity skim" You pay your mortgage to the scammer, and the scammer is supposed to pay the lender, but suspiciously, they field all the letters and phone calls from the lender for the six to nine months before you're foreclosed on, then they disappear with your payments about the time the Sheriff comes to the door to evict you.

Getting it right

If you're not quite ready to refinance, but you think that your job might be on slightly shaky ground, it may be best to get the mortgage refinance out of the way now, particularly if your financing is government-backed. Both VA and Freddy Mac loans are currently able to be streamlined, so really, it's as easy as going to your current lender and asking if you qualify for this streamlining. If you've never heard of the mortgage refinance company who's sending you circulars in the mail, chances are good that they're not a reputable company. Always ask at your current lender about refinance opportunities before switching to another company. There's less paperwork, and when handled in-house, the process is almost staggeringly easy. The biggest thing you need to remember? If it sounds too good to be true, it is too good to be true!

Lawyers.com; "Scam Alert: Mortgage Refinancing Scams"; Susan Calistri