Refinance Headache - Who will Banks Lend to?

[Snave]

I am about to explode. We are in the process of refinancing since the rates are going back down. We have actually been in the process for the last few weeks and are getting ready to pull the trigger when rate gets close to where we would like. The problem we are having is that the underwriter is not happy with the appraisal and therefore is not sure what they are going to do. The underwriter thinks the appraisal is too high even though it is about 75K less than when we bought the house 18 months ago. As well, a house with about 1250 less sqare feet was bought on our street less than 3 weeks ago for more money than our current apparaisal. Go figure! We have every upgrade imaginable and the other house doesn't. We have the same builder and I have walked through it several times.

What frustrates me to no end is that if the bank won't lend to someone like me, how in the world are people in trouble going to get a loan. We have credit scores of over 800, make a very good income (the loan would be about 15% of our income), and have no other debt but our current mortgage. Even with the 75K loss that the appraisal has on our home we still would have 33% equity in the home. I am baffled. I just sent in in all of my financial statements and we could come close to paying off the house with all other investments. I am glad to see the banks are trying to get the money flowing again!

[Ima saver]

I don't blame you for being so upset!!

[Snave]

More than anything I just wonder how we are going to get out of this financial crisis. Who in the world will they lend to? If we don't get the refi, it is not a big deal, but we would like to save the few hundred bucks a month. But I just keep thinking about everyone else out there that is in dire straights and thinks they are going to get a loan. I don't see it happening with all of the restrictions they have in place.

[EEinNJ]

I don't know if it's still relevant, but it used to be the loan-to-value ratio was important, and in your case, it seems you're putting down plenty. The idea is that you have enough money in the deal that if you don't make payments, when they foreclose they can recover their costs.

[snafu]

What was the result of your independent appraiser? Does the lending firm require you to use their staff appraiser? Perhaps a concise list with photos to back up your position would help.

Would it be beneficial to go higher up in the organization? It sounds like the underwriter is not the decison maker in that organization.

[Snave]

I thought the loan to value ratio was pretty good also. It was closer to 40% when we bought the home new 18months ago. Since then, the drop in home prices has it around 33%. They could still take another 65-75K off the appraisal and we would still be at 20% equity. That would mean the house dropped 25% in value in the last 18 months if we take an additional 75K off. That is ridiculous considering we live in the midwest and we didn't have the inflated prices as much.

I guess the underwriter has been going on the internet and looking up homes around ours and using the comps. Most of those homes are in a little older neighborhoods (we are new). They also need a lot of updating. I know because we looked at many of them before we built. The appraiser used comps to some homes in our neighborood and a few of the newer homes that were in proximity. I would say it is a pretty fair appraisal knowing the condition of the market.

As for pictures, etc... I sent an e-mail today telling them to send her out any time she wants and then to compare our home to what she sees on the internet around us. I even told her I would come pick her up in one of the two paid off cars we have!

I think the whole thing will get figured out, I just am left wondering how in the world others that need a loan will ever get one if we have had this much trouble.

[FrugalFish]

I would be pretty upset too. Just sitting here shaking my head and feeling frustrated for you.

We started the refi process ourselves last week and have a situation similar to yours in numbers- I wonder if we will run into problems too. Nothing would surprise me in this day in age.

Good luck to you. I hope it gets figured out in your favor.

[Snave]

I spoke with the person I am working with at the bank (they are a friend also) and they told me it was the underwriter causing the stink. My friend seems just as shocked as I am.

[ksluis62]

Is this a local bank? I wonder if a little competition would move them off the dime. I have not found local banks to be competitive with the larger internet-based mortgaged companies. Local banks may be more risk-averse, also. I refinanced an investment property in December, and my FICO is much lower than yours. I've used InternetMortgage.com-Mortgages and Home Refinance Online several times with good success. You can also investigate a good list of lenders at The Mortgage Professor's Website.

Even if you don't use one of these other lenders, the threat of doing so might help get the underwriter moving.

[Scanner]

I was listening to NPR the other day and get this story - it's just about as bad as yours, actually probably worse.

There was a businessman who had a35K line of credit at a bank for 11 years. He used it to buy equipment for his business (tangible items). When it came time to renew his line of credit, they denied him (maybe it revolved on a 5 year basis like mine)>

Getting very angry (of course), he figured he was loaning the bank money with his CD's. So he literally cashed out his CD's (took it out in 100's) of the amount of $50,000 and then put the cash in a safe deposit box until, in his words, he can figure out where this train wreck is headed.

I agree with you - I am not sure how we are going to get out of a financial crisis when the bank won't loan a businessman, with an established history of doing solid business 35K, when he's got 50K in liquid assets in the same damned bank.

Yet, 5 years ago, they'd lend any yahoo that could fog a mirror 400K to buy a house.

IT's a topsy-turvy world.

[LuxLiving]

Ahhh, and I remember just last year myself and others who lived through the 80's Savings and Loans fiasco trying to tell kiddos on here about what goes up CAN and probably will come down!

Snave, I hope it works out in your favor.

[Goldy1]

I went thru a lot of red tape from the underwriter getting my life insurance policy. IC an't blame them, but they had a lot of questions.
But what was frustrating was instead of reading my whole application and asking me 5 questions all at once, the underwriter decided to ask me one or two a week at a time for over a month.

[Russell]

I'm kinda in the same situation, well worse because a month ago IndyMac was offering 4.875% and I thought it would go lower so I waited a bit and now I see their rates are over 5% plus a very high closing cost like $9k or so.

So where'd the bail out money go? I think I'm going to write to our congressmen and senators.

[Snave]

Russell, the rates are heading down again now. I bet you will find the 4.875 again.

As for the bank, it is local and is more than competitive. In fact, I have been able to get better rates there than anywhere else. It is just one of those things. I did speak with the sales person for our builder today to get the info for the home that recently sold and it is 1200 sq/ft less than ours. He said it is decked out, but not anymore than ours is.

[Snave]

Originally Posted by Scanner

I was listening to NPR the other day and get this story - it's just about as bad as yours, actually probably worse.

There was a businessman who had a35K line of credit at a bank for 11 years. He used it to buy equipment for his business (tangible items). When it came time to renew his line of credit, they denied him (maybe it revolved on a 5 year basis like mine)>

Getting very angry (of course), he figured he was loaning the bank money with his CD's. So he literally cashed out his CD's (took it out in 100's) of the amount of $50,000 and then put the cash in a safe deposit box until, in his words, he can figure out where this train wreck is headed.

I agree with you - I am not sure how we are going to get out of a financial crisis when the bank won't loan a businessman, with an established history of doing solid business 35K, when he's got 50K in liquid assets in the same damned bank.

Yet, 5 years ago, they'd lend any yahoo that could fog a mirror 400K to buy a house.

IT's a topsy-turvy world.

My grandfather told me yesterday that when he went to his bank to get a car loan earlier this year, he couldn't get one from them. So, he told them he needed two checks from his account. one for the purchase price of the car and the other for the remainder of the 200K he had in the bank with them. He is retired, owns his home, has significant investments and an additional 200k in a money market at that bank.

[MonkeyMama]

I'd shop around. We just refied with no problem. Loan to value was 65% and the appraisal was a little inflated if you ask me. (Fine with last month's prices, but prices are still flushing down the toilet. You would think they would look forward a bit). But we have a solid 20%+ equity no matter how you slice it.

For us they rushed our loan through so fast because so few on our area have ANY equity. They seemed desparate for qualified refinancers. I'd shop around, someone would love to have your business.

[Bernz]

That is upsetting! I still think that you should be able to refi your house at possibly the best rates considering your current financial and credit situation. We have been thinking about refinancing too at about .875 lower until we started shopping around. We decided to delay it as the refinancing fees involved is a killer. Our credit scores are 780 and 790 respectively and we also have enough cash to payoff the house if we want to with no other debt either.

[TBH]

We just opened a HELOC and it was also a nightmare. I am still annoyed with PNC bank.

[Saving in So Cal]

The interest rates hit my magic number yesterday. I want a loan through my retirement system since the fees are capped pretty low. I contacted my retirement system and got the names of two approved lenders in my area. I contacted both lenders, stating what type of loan I wanted (which you can't get if you are distressed borrower) and the city where I live (which has been only minimally affected by the downturn in real estate prices). I have yet to receive a call back. Obviously, I am going to keep moving on until a find someone to talk with me, but it is really quite exasperating. You'd think lenders would be hungry enough for decent loan that someone would at least call me back to screen me as a prospect.

[ksluis62]

Originally Posted by Snave

My grandfather told me yesterday that when he went to his bank to get a car loan earlier this year, he couldn't get one from them. So, he told them he needed two checks from his account. one for the purchase price of the car and the other for the remainder of the 200K he had in the bank with them. He is retired, owns his home, has significant investments and an additional 200k in a money market at that bank.

That is so sweet to be in that position! How nice to be able to stick the dagger into the bank and twist it around. And how stupid are they looking right now? That $200k in deposits means probably 10 times that amount in ability to loan out money.