Should I refi?

by Mike Mueller on August 28, 2008

Ok, maybe the question should be,
“Can I refi?”

Whether you can or cannot, the Fed’s (as in the Federal Reserve Board) just announced a new site for homeowners that is supposed to help them decide if it is better to refinance or stay with what they have.

http://www.federalreserve.gov/pubs/refinancings/default.htm

It does contain some solid and useful information.  It explains to the borrower how to compute their break even point, what LTV means, paying points and other informative points that every borrower really should know.

As in all materials produced by the government it also contains some “inaccurate” information as well.  Living in Jumbo Land, I particularly liked this one:

Title search and title insurance. This fee covers the cost of searching the property’s records to ensure that you are the rightful owner and to check for liens. Title insurance covers the lender against errors in the results of the title search. If a problem arises, the insurance covers the lender’s investment in your mortgage.
Cost range = $700 to $900

Oh well.  I’m figuring they used $200,000 home for their numbers.

All in all it’s good information, something every borrower should understand, and something every loan officer should be educating their clients on.

I can’t help but think though that this is a little like closing the barn doors after the cows have…

Moooooooo!

Well, you get the picture.

  • Damn right its too late. Very few people are going to make any decision at this stage. I'm thinking if they set up some kind of live helpline where people can get answers to questions based on their own specific situation, that might be very hellpful.
  • Mike, great post, however you really need to work with the individual and see what thier goals are, and the way that the market is, how long they plan on staying in the property. have them call me I would be happy to go over thier situation and see if they need to refinance or not or if they can or not. At this point we all need business and we will take any way we can.
  • Gina Gardner
    I noticed flaws in their worksheet as well. It takes the old payment minus the new and calls it "savings" and uses that calculation to determine the breakeven point. However, in a refi we all know that payments are lowered just by stretching out the repayment term; not only might there not be any actual "savings" but in fact the new loan could concievably cost more over its life. Surprised they would be so cavalier about that.
  • You know, I sympathize with the statement about locking the barn door after the cows have gotten out, but having started in the investment business in the early 1980s, I am dumbfounded by how many times the same mistakes have been repeated over and over again. Some people have shorter memories than the cow in your picture, so there will be a next time, and any attempt at education can, one hopes, save a few people next time around.

    Of course, as Gina points out, that's only if the education is worth anything. The worksheet definition of savings is something a sleazy mortgage broker would try to pull.... Perhaps one of them went to work for the Fed after losing his job. Then again, if you consider this definition of "savings," it makes the federal budget deficit easier to understand.
  • Ling - There's a big part of me who doesn't want big brother involved in anything mortgage educational. And then another part that wants them to get rid of all the bad guys (LO's) thereby making the world safe again.
    One of the issues with the Govt. is that there is also a generic aspect to everything they do. They have to reach out to a very wide array of people and situations. That leads to generalized statements.

    VA - Pretty much every reader here at Lenderama is in line with you. "you really need to work with the individual and see what their goals are, and the way that the market is, how long they plan on staying in the property". Preaching to the choir. : )

    Gina - It's called Govt. Work for a reason. ;)

    Richard - History, like stupidity has a way of repeating itself.

    My point, somewhat lost in all this, was how typically useless and lame this is.
  • Great, from the same people who brought us the Good Faith Estimate & Truth in Lending disclosure forms as a way of "simplifying" the home loan process we now get a website designed to help them decide if refinancing makes sense.

    I applaud the effort because I think fiscal literacy on the part of the consumer is at the root of many of our economic problems (including the housing crisis).

    However, I agree with VA refinance in the sense that you really need to work with the individual to identify their goals. Sometimes cost considerations are not the only objective.

    Here is an article I share with my clients when considering a refinance transaction (http://www.evanswanson.com/?p=61) Please feel free to comment on it at my website.
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