Expert Q&A Archive
Do I need a lawyer to help re-negotiate mortgage refinancing?
I’d like to get some information about mortgages. I am a single mother. I purchased a home four years ago, and now the value has gone down below what I purchased it for. I refinanced once and then got an adjustable rate mortgage. I’m at the point where I kind of feel like I need a lawyer to negotiate my next mortgage if I can get refinanced.
Could you make some comments about how we tell if we’re being discriminated against as a woman [in getting credit]? It seems very cut and dry, (what your credit score is) but in the negotiations at times it seems as if they use whichever credit reporting agency, (some of which I haven’t heard of) so it just doesn’t seem as black and white as it should be. And what is your take on mortgages and refinancing?
Rachel Lane, CFP:
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I believe the most important thing is to find a well-respected mortgage broker who has been in the business for at least 10-15 years and ask him/her smart questions [such] as you've listed. You might consider a fixed rate mortgage as well. Rates are relatively low right now, and if we get into an inflationary economy on down the road (with the amount of treasuries in supply), interest rates are likely to go up. And, with a fixed rate mortgage, you always know what the rate is and what your monthly payment is (fixed)!
As far as the credit reporting agencies are concerned, there are 3 major ones out there that really matter [Equifax, Experian, and TransUnion] (go to www.annualcreditreport.com). Ask your broker which one they use and why.
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I sought out advice from a well respected mortgage specialist. Below is her response...
“The credit score is from 3 agencies and the mid score is the one that is used by all lenders. There is no way to discriminate in this process as all lenders have to use the same agencies and all use the mid score. They might inform you of your low and high score and that is where it feels unfair.
There is no 100%+ financing available at this time. If the appraisal comes in high enough, then we can do 95% using an FHA product. If possible, it is good to get out of the ARM and into a 30-year fixed at this time.
If your property truly has gone down that much and you owe more than the value, my best advice is to call the current lender and start the "hardship process". You will need to prove the value [of your home] and that the payments are currently hurting you. That being the case, they will work with you to lower your payments - usually not to a fixed rate but lower than you are currently paying and usually for 2 years, but it is entirely up to them. Create a nice day!!”
Cash Flow Specialist
Sr. Loan Financial Consultant
PLATINUM COMMUNITY BANK - Home Mortgage
Hope that helps.
Shauna L. Roberts:
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We sell our mortgages to FannieMae, and we have to follow their guidelines. Those guidelines seem to be changing on a daily basis these days. We have to pull a credit report from the three major credit bureaus, and FannieMae requires the middle score as a representative score. The guidelines may vary slightly between FannieMae, FreddieMac or FHA, but the lender/broker has to follow a very strict set of guidelines. It is getting tougher to qualify for a mortgage based on debt-to-income ratios, minimum credit scores and Loan to Values.
If you are over 80% of the value of your home, then the PMI [Private Mortgage Insurance] company that will be insuring the loan has a whole set of guidelines of their own that have to be followed.
Bettye J. Banks:
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Housing prices in many markets are down drastically (but not in all). Interest rates however are not necessarily down. I would never have recommended an Adjustable Rate Mortgage for you, because you are subject to the whims of the marketplace.
Generally, it is not in the best interest of the lender to discriminate against you as a woman. (You are in a protected class.) Lenders must meet federal guidelines and standards in providing home mortgage loans to credit-worthy applicants. The relevant phrase here is CREDIT-WORTHY APPLICANTS.
What does your credit look like? Your credit score is a combination of factors, including your payment history - about 35 % [of the score]; your debt utilization ratio (Do you have your accounts [that are] over 50% of your available credit?) – about 30% [of your score]. These two factors alone account for 65% of your credit score! Other factors go into making up your score. The score is behavior-driven. A traditional credit counseling agency can help you determine whether your credit report presents a challenge in re-writing your loan.
I strongly suggest that you look for a HUD-approved Credit and Housing Counseling Agency who also offers Fair Housing Counseling. Ask the agency if they have a Fair Housing Initiative Program (FHIP) counselor. The agency can help you determine if you have been the victim on discriminatory
[Editor’s Note: You can search for a housing counseling agency in your area from the U.S. Department of Housing and Urban Development’s (HUD’s) Website at www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm. HUD also has information about fair housing and equal opportunity on their Website at www.hud.gov/offices/fheo/index.cfm.]
Virginia Clay CFA:
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There are several major credit bureaus:
CSC Credit Services
Consumer Assistance Center
P.O. Box 674402
Houston, TX 77267-4402
Equifax Credit Information Services
P.O. Box 740241
Atlanta, GA 30374-0241
Experian (Formerly known as TRW Information Services) National Consumer
P.O. Box 2106
Allen, TX 75013-2104
TransUnion Corporation Consumer Relations Center
P.O. Box 390
Springfield, PA 19064-0390
There is also your FICO score.
It is difficult to prove discrimination. If you want to pursue this, you need an attorney.
You definitely should get some mortgage counseling, ideally from a local non-profit entity that specializes in helping people like you. Each situation is different you will need someone to look at your statements and agreements and learn about the house you took the mortgage on.
Do not call one of the toll free numbers that you see on the television to help with credit because not infrequently, these businesses prey on people with bad credit situations.
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I was widowed as a young mother with 2 children 17 years ago and I have yet to experience any gender discrimination in the financial arena. Over the past 17 years I've refinanced an existing mortgage and I've secured a new mortgage on a different home. In both cases I prepared myself to negotiate the interests rates by making certain that my credit reports were accurate and that my balance sheet was healthily. It is important to "pull" your credit report from the three bureaus before you beginning searching for lenders Often times each bureau will give a different score and the mortgage industry usually looks at the middle score, obviously any score of 750 and above will aid you in negotiating your interest rate. Even if your credit score is not that high you may be able to negotiate the interest rate when you and lender discuss the items appearing on your credit report. On your balance sheet your debt ratio should not be more than 40% which means that you have claim to 60% of your assets which lenders like to see. Also, having a balance sheet available for your lenders indicates that you understand finance-personal balance sheets are positioning tools for the individual just like for corporations. When you refinance shop around to find a lender with the best interest rate and the lowest closing costs-which are all negotiable if you've taken the time to financially position yourself with an excellent credit scores and a healthy balance sheet.