Refinanced 4 months ago at 4.2%, now same broker said I could refiance again?

[jimmyle]

I haven’t reply to her email and she didn’t mention the rate. What is the current rate? And should I refinance at all, after just 4 months?

[an]

Rates are different for everybody, so you have to get rate from that broker and find out. Whether its worth it to refi after 4 months, it depend on how much it’ll cost you to refi and how much did you pay for the last refi and where are you expecting rates to go. We need more info.

[jimmyle]

Currently I am at 4.2% 30 years–4 months into the loan

New rate being offered: 3.875% with $1500 fee.

Should I refinance?

Many thanks,

[all]

Provident advertises 3.875% with 1.125% closing cost credit. If your balance is in high $300K’s the credit should cover their closing cost and some.

If you don’t want to shop around check if 4% would come with a credit high enough to cover the closing cost.

[an]

$1500 fee (is that including 3rd party fee or is that just lender’s fee?). How much money do you save a month? Do you expect rates to drop again?

[lifeizfunhuh]

I’m an attorney so I thought I would interject something about the perils of refinancing.

In California, there is an “anti-deficiency” law on your primary residence, with your ORIGINAL LOAN. This means that if you suffer hard times and cannot pay your mortgage, you can walk, and the only recourse the lender has is to take the home. They cannot come after you for the difference between what your house is worth and the balance on the note.

If you refi however, you lose this protection. So for example, if your original note was for 500k, you refi, then default, your house is sold at auction for 300k, the bank can come after you for the “deficiency” or 200k. Is that worth a few hundred a month? What is the piece of mind worth that they can only take the house and nothing more? Lots for me thanks.

[sdrealtor]

I’m not an attorney but that was a faulty post. CA is one action state. If the first lender forecloses on you in a non-judicial fashion (which is the case in 99.9% of foreclosures) they cannot pursue you because they already took their one action. The refi/deficiency only really becomes an issue on sold out junior liens (i.e. refied 2nd and 3rd loans that receive nothing after a foreclosure by the 1st lienholder)

[scaredyclassic]

What reasons would provoke a judicial foreclsure?

[lifeizfunhuh]

Thanks for the clarification sdr, but it was not a “faulty” post.

You are correct IF the lender seeks non-judicial foreclosure. This doesn’t mean the lender cannot seek a judicial foreclosure. Here is the scenario… a high net-worth individual makes a bad purchase on his home, and decides to save some money via a refi. The value of the house subsequently tanks and he decides to make a “strategic default” thinking there is nothing the bank can do about it because he has received advice on the internet that the bank cannot go after their assets.

The reason that 99.9 percent of foreclosures are non-judicial is because the deficiency is less than the expected litigation and other costs. I don’t know where that number is because I don’t litigate in this space. However, there is a number where judicial foreclosure is worthwhile, and personal assets are in jeopardy.

People should make their own choice based on their own situation, but it is better to have complete information about your rights before you do.

[Coronita]

[quote=lifeizfunhuh]Thanks for the clarification sdr, but it was not a “faulty” post.

You are correct IF the lender seeks non-judicial foreclosure. This doesn’t mean the lender cannot seek a judicial foreclosure. Here is the scenario… a high net-worth individual makes a bad purchase on his home, and decides to save some money via a refi. The value of the house subsequently tanks and he decides to make a “strategic default” thinking there is nothing the bank can do about it because he has received advice on the internet that the bank cannot go after their assets.

The reason that 99.9 percent of foreclosures are non-judicial is because the deficiency is less than the expected litigation and other costs. I don’t know where that number is because I don’t litigate in this space. However, there is a number where judicial foreclosure is worthwhile, and personal assets are in jeopardy.

People should make their own choice based on their own situation, but it is better to have complete information about your rights before you do.[/quote]

Interesting,

…though I would think a “high net worth individual” wouldn’t be seeking internet advice on strategic defaults as the end all be all

… unless he was like Chinese or something… that would be trying to save a few bucks only to lose the bigger pot in the process…kinda like someone who would cancel $100/year collision policy on a 8 year old Mercedes thinking that it’s garaged 99% of the time and the risk of being in an at-fault accident would be minimal… only to be in an at fault accident 2 weeks later

…… Oh shit, never mind… Point taken…

But on a serious note, are there actual cases where there was an judicial foreclosure in CA. I’d be curious to read about what happened in the end..

[briansd1]

I’ve researched lots of foreclosures.

I’ve never come accross even one judicial foreclosure. If someone knows of one, please post the parcel number so we can research as an academic exercise.

In California, foreclosure happens through Trustee’s sale.

Sometimes looking at every possible legal angle leads to paralysis.

It’s unlikely a high net-worth individual would do a strategic default anyway, unless he bought a multi-million dollar property at the peak and he’s really suffering from buyer’s remorse.

If he bought today and made a 20% downpayment, it’s unlikely he’d be underwater anytime soon.

[sdrealtor]

It was a faulty post because clearly the OP is not a high net worth individual. The case you laid out would be a massive outlier. The case I laid out is what happens in nearly every case. With that said, every client we meet with who is considering a walk away or short sale is explained the anti-deficiency laws and the possibility of judicial foreclosure (as remote as it is).

[scaredyclassic]

What about people who aren’t nigh net worth but who are clearly good people to have a judgment against?

Is there any landscape shift that could make judicial foreclosures more desireable in the future?

After all I think strategic defaults were unthinkable not too long ago

[Anonymous]

[quote=lifeizfunhuh]So for example, if your original note was for 500k, you refi, then default, your house is sold at auction for 300k,[/quote]

If someone is financing $500K through a refi, the property is probably worth a bit more than $500K.

Hard to imagine a scenario where it would only sell at $300K in the future, even at auction. That’s 40% less than the note. Sure, anything can happen, and these sort of numbers did happen a few years ago, but the bubble has already burst.

Myself, I wouldn’t lose any sleep over the “recourse” aspect of a refi.

[bearishgurl]

[quote=lifeizfunhuh]I’m an attorney so I thought I would interject something about the perils of refinancing.

In California, there is an “anti-deficiency” law on your primary residence, with your ORIGINAL LOAN. This means that if you suffer hard times and cannot pay your mortgage, you can walk, and the only recourse the lender has is to take the home. They cannot come after you for the difference between what your house is worth and the balance on the note.

If you refi however, you lose this protection. So for example, if your original note was for 500k, you refi, then default, your house is sold at auction for 300k, the bank can come after you for the “deficiency” or 200k. Is that worth a few hundred a month? What is the piece of mind worth that they can only take the house and nothing more? Lots for me thanks.[/quote]

I’m totally on board with this opinion, lifeizfun.

I have seen more than a few borrowers get pursued for a deficiency after “walking away” during the “Gulf War malaise” and in the month/years afterwards. I’ve also seen a handful of (delinquent) borrowers receive Form 1098 from their lenders for the “forgiven portion” of their mortgages in a “short sale.” Just because FF lenders currently have a “moratorium” until 2013 on lender issuance of these forms, this in no way means it will continue.

[Author]

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