Some Ohio borrowers with toxic adjust- able-rate mortgages could qualify for a new program that steers homeowners to reasonably priced fixed-rate loans. The Ohio Housing Finance Authority is offering borrowers the chance to refinance with a mortgage it's calling "the opportunity loan." Unlike the version the agency first launched in spring -- which was so picky, most home owners facing mortgage trouble couldn't qualify -- the terms associated with the refinancing loan this time around could genuinely offer many strapped borrowers a new opportunity. For instance, low credit scores alone won't be enough to disqualify borrowers. Late payments won't, either. And wisely, the agency will require borrowers to go through housing counseling.
People whose mortgages are worth more than their homes won't be able to refinance under this program (or most others). But for borrowers who do qualify, the agency could have up to $300 million to use to finance these 30-year fixed-rate loans. And based on industry data showing that an average home loan in this state is about $125,000, the agency could help many homeowners refinance. Unfortunately, very few borrowers have applied so far. The agency has reservations for just $10 million worth of loans. It is trying now to reach as many borrowers as it can. (Learn more at www.ohiohome.org/refinance/factsheet.pdf.)
A recent survey by Bankrate.com showed that about one-third of borrowers didn't know whether their loan's interest rate was fixed or floating. Considering that $14 billion in Ohio subprime adjustable-rate home loans will reset to a higher interest rate by the end of next year, the least homeowners can do is know whether their mortgage rate is on the way up. The foreclosure crisis has hit Ohio hard already, and it will get worse as rates climb. People will "go over the falls," as the agency's executive director, Doug Garver, puts it. Even though some in trouble inevitably will sink, throwing a lifeline to as many borrowers as possible is better than watching idly.
Red Flag Mortgage Refinance Offers
Teresa Dixon Murray, The Plain Dealer, February 28, 2009 Money Matters.
Mortgage Refinance Offer Raises Red Flags
Q: I got a letter from Union Capital Mortgage of Ohio offering to refinance my mortgage. They even say they can refinance my loan if I owe more than I originally borrowed. Is this legit?
A: I'd stick the letter in the shredder. I don't know where the Highland Heights outfit is a good company or not, but there are a few red flags.
One, it's virtually impossible to refinance a fairly new loan (yours is 3 years old) for more than you originally borrowed unless you put down a whopper down payment. Most people's homes have lost at least 15 percent of their value in recent years, and many have seen drops of 25 percent or more.
Two, it teased an interest rate as low as 5.5 percent, with an annual percentage rate of 6.144 percent. A spread that wide--nearly two-thirds of a percentage points--indicates there are a lot of extra fees. You should aim for an interest rate-APR spread of no more than a quarter point.
Three, my favorite: The teensy tiny disclosure at the bottom of the letter says the interest rate and APR "are subject to change at any time without prior notice, including after the loan origination process has begun." So it can quote you one rate and change it to another rate later? No way. To the shredder it goes.
By the way, United Capital Mortgage doesn't have a current or pending application to operate as a mortgage broker, according to the Ohio Department of Commerce. The company that previously was at the same address had its license canceled in 2005.
To check whether a mortgage broker, loan officer, check casher or other entity is licensed with the state, go to: elicense2-lookup.com.ohio.gov or call 1-866-278-0003.
