Underwater Refi Rejected...anyone with similar experiences or advice?

[nadocane]

I have a 7/1 ARM which doesn't reset until 2013. Unfortunately I live in S. FL and bought in 2006 so I am more than 25% underwater. Still, given the low rates, and having little chance to sell my home before the ARM resets due to how much things have crashed, I was willing to pay down to 125% LTV at closing to refi now while I still can. The loan is backed by Fannie. I went through the whole process, had an appraisal, submitted and signed all docs...and at the last minute the lady at Citi calls and tells me "the underwriter at Fannie says we cannot refi this loan at 125% LTV, only 105% LTV". This made no sense to me, and of course it made no sense to the person I spoke to at Fannie. So, I am unsure what to do. It seems that for whatever reason, maybe CITI is the one who doesn't want to do this refi, but you know how it is nobody will ever give you a truthful answer on anything. Does anyone have any thoughts or suggestions? The only thing I can think of is to try and refi at 125% with another lender at this point. Thanks in advance for any help/suggestions/similar stories!

[Evan Bedard]

Hi Nadocane welcome and thank you for joining.

This made no sense to me, and of course it made no sense to the person I spoke to at Fannie. So, I am unsure what to do. It seems that for whatever reason, maybe CITI is the one who doesn't want to do this refi, but you know how it is nobody will ever give you a truthful answer on anything. Does anyone have any thoughts or suggestions? The only thing I can think of is to try and refi at 125% with another lender at this point. Thanks in advance for any help/suggestions/similar stories!

I personally have not seen anyone able to refi in the past two years regardless of who the lender is. Your best bet would be to go for a loan modification, or if you are trying to sell the property a short sale..

[nadocane]

Hi Evan, thanks for the reply. I guess I am confused--isn't the whole purpose of what the gov't did in allowing people who were underwater to refi to actually refi? I cannot get my loan modified...I was told I make too much money and on top of that have some savings. I have excellent credit and do not want to ruin that...my fiancee to be is in Med School and thus has a ton of debt and I can't even imagine how low her credit score must be...so I am trying to keep mine in tact so we have a chance at buying a house of our own in the next few years. That's why I wanted to refi through the 125% LTV program...a short sale would have a big impact on my credit rating and put us in a bad position...not to mention I'm concerned about a deficiency judgement since I do make decent money and have some savings.

[nadocane]

Hi Evan, thanks for your reply and your help. How come people are not able to refi? Maybe I am just too naive to think that if they expanded the LTV ratio for refis that people would actually be able to do it!!

I have been told by Citi I do not meet the criteria for a loan mod because I make too much money and also have a bit in savings. As far as a short sale goes...I have excellent credit and want to try ruining that at all costs because my fiancee-to-be is a Med Student and has an insane amount of debt...so one of us needs good credit so we can buy a house of our own in the next few years. If I were to go for a short sale on this one, my credit would be shot, and we would not be able to buy a place of our own in the near future. I am also concerned about the possibility of a deficeincy judgement since I am in FL and I do have some money...nowhere near the amount owed but not pocket change either. So like many others I am stuck between a rock and a hard place...if I can't refi, does it really make sense to keep throwing money away until my ARM resets in 4 yrs and end up putting it up for short sale then due to exhorbatant payments? On the other hand, do I ruin my credit and our chances of owning a place of our own for the next 7 yrs right now?

Maybe you can tell me...with deficiency judgements, do banks request whatever outstanding debt they wish to collect up front, or over a period of time? Though, I guess the latter would still be debt and crush my credit score anyway. So confused about what to do! My dad is a CPA, and I trust him completely. His opinion is a short sale should be my last option in desparation because my excellent credit is more important at my young age (28) looking to get married. I am not so sure...we probably will not get married for a few yrs, maybe if I were to ruin my credit now and get the recovery process underway we can crawl out of it after a few yrs of marriage? This is the dilemma I face. In the end, I don't even care about getting my 20% downpayment back anymore...I'd have to rent the place out until I was nearly retired for that at this point. The ideal thing would be, if we had to move, which we likely will for her, rent the place out until I can pay down to market value, but that will be next to impossible once the ARM starts resetting.

[Sunbeam]

Hi, If the rep with Fannie tells you what Citi is telling you makes no sense, then I suggest you contact that person at Fannie and complain that Citi is holding you up. I would then suggest you also write to your elected officials and cc Citi management and Fannie on that letter. This may get things moving for you. Fannie is the investor, remember that. Citi manages the loan FOR Fannie. Fannie is the one who would ultimately have the yeah or ney over your request here. Someone at Citi is just trying to blow you off it seems.....Good luck!

[davephx]

For refi (HARP) the last I heard is from Sept WSJ article:

The program was initially set up for borrowers who owed between 80% and 105% of their home's current estimated value. In July, the administration said it would allow more borrowers to participate by including those with mortgages of as much as 125% of their homes' value.

Fannie began accepting HARP loans with the up to 125% loan-to-values on Sept. 1. Freddie will begin accepting them in October.

Full report at Confusion Roils HARP Program for Home Refinancing - WSJ.com

For mods which is easier, take your monthly income x 31%. If you are already paying less than that including taxes and insurance you do not qualify period. They can't change the program just for you.

Savings can be a problem if more than 3x 1st mortgage payment but this doesn't seem to be a hard rule and sometimes it seem excess cash needs can be explained away. It seems not to be an absolute like the income test.

[BadBobMo]

Most here have lost jobs and our homes are way under water and can not re-fi or we would.

[TrappedFL]

This does not make sense to me. My understanding is the Freddie and Fannie are both doing the 125% refi, as I also applied for it (my loan is with Freddie). I was told that my Freddie-backed loan WOULD be eligible, but my Loan to Value far exceeds 125%. You're in a similar place to me. I am trying to short sale, because I have no other option at this point.

I also live in South Florida - my home is worth 1/2 of the loan amount, so I did not qualify to refi under the program.

Have you worked your way up the food chain at Citi? Try to speak to a higher up and figure out what the deal is.

[nadocane]

Thank you everyone for your thoughts. TrappedFL, we are indeed in similar positions, though my LTV is not nearly as dire as yours. Good luck to you as well. I have not contacted any "higher ups" at Citi because I just stumbled on this site and found that information. I will have to give it a try. Good luck to you as well Trapped...if you wouldn't mind posting back how it goes, I'd be curious to find out.