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Bank of America officially dropped the Countrywide name on April 27, but the problems of borrowers continue. Here’s a letter sent to us recently by a reader named Scott.
April 17, 2009
Congressman Barney Frank
U.S. House of Representatives
2252 Rayburn Building
Washington, DC 205152252
Dear Congressman Frank:
Washington, DC 20515
I’m writing on behalf of my daughter who, as a working mother with two small children, has very little time to spend seeking the help from her elected representatives.
My daughter recently applied to refinance mortgage on her house in Northborough, MA under President Obama’s new re-financing program. As it is for people who bought their homes in the last few years, the value of her house has fallen to a point where she can’t get a conventional 80% mortgage, so the administration’s program is her only hope for reducing her monthly payments.
Her mortgage lender, Countrywide, said she qualified and offered her a much reduced rate (5% vs the existing 6.75%). Countrywide’s representative encouraged her to move quickly to “lock-in” the reduced rate and said that her monthly payment would be reduced by approximately $450. All of this is very positive, but there’s a catch.
Countrywide said there was no point in ‘shopping around’ because the government’s program was limited to re-financings with the current mortgage holder, and then they told her that there would be over $6600 additional principal on the new note because of points and fees. Fees alone are over $3000. There’s a “lender’s fee” of $775 and an “application fee” of $400, which I assume go to Countrywide along with the $3500 charges for points. There’s a fee of $786 for new title insurance to replace the title insurance now in effect. Countrywide says this is a state requirement, buy why the state should require anyone should pay twice for the same thing is difficult to understand. There’s a “survey fee” of $150 (no new survey is needed – nothing has changed since it was last done in 2007), a “tax service fee” (what ever that is) of $90, municipal lien fee of $90, closing costs $675 and the list goes on. Countrywide apparently admitted that there was no new “closing” per se — the process was simple, they’d generate new documents (probably with a few mouse clicks) and send them to my daughter for signature. “Send them back and the deal’s done,” said Countrywide.
I’m sure it was not Congress’ intention to enrich mortgage lenders by allowing them to charge outrageous amounts to refinance mortgages under the government’s program, but apparently that’s exactly what’s happening.
President Obama’s program to “help the middle class” may lower my daughter’s monthly payments, but by allowing mortgage lenders to charge outrageous points and fees, it will also put her deeper in debt.
My guess is this is going on all over the country — mortgage companies generating profits from charging points and fees to people desperate to lower their monthly payments. I strongly urge you to something to stop this rip-off of middle-class working people.
Scott says he also sent the letter to his daughter’s Congressman and got a quick email back saying that if it was an urgent matter he could contact his local office. “I did and got a referral to a local ‘home ownership agency’ that I have not yet been able to reach,” Scott said. “The person I spoke to in the Congressman’s office was sympathetic. He was a father who’d just been through this with his daughter. He told me — and get this — his daughter’s loan modification ‘improved’ the terms of her loan, but actually RAISED her monthly payments by $60 or so. I find that hard to believe, but perhaps with large fees and falling home prices anything is possible.”
We asked Scott for another update last week. Here’s what he said:
“As for updates — of the two congressmen and two senators I sent letters to only one, my daughter’s congressman Jim McGovern (D, MA 3rd district), bothered to write back. He suggested that we contract his local office, which we did and they referred us elsewhere. Frank (my congressman), Kennedy and Kerry have not been heard from — not a hot enough issue perhaps?
My daughter went ahead and did the deal with Countrywide as it was the only real option she had for lowering their monthly payment. Given costs involved, it will take several years to “break even” — but the re-fi has improved their monthly cash flow, so in a sense I guess it’s helped. I just find the thought of paying Countrywide — one of the prime movers in causing this fiasco in the first place — over $5000 to generate 15-20 pages of new documents appalling.”
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.