What Banks Don’t Know Can Hurt You

Brick WallYou know that mortgage rates are at historic lows.

You salivate at the thought of knocking a big chunk off your monthly expenses. “Honey, we could save $350 a month if we refinance to a 7/1 ARM!” I screamed to my husband recently, after a refi calculator fed my hopes.

But within a few phone calls to banks, we slammed into a brick-hard reality. Like millions of homeowners today, our house is worth scarcely more than our $169,000 mortgage. And we paid $225,000 in 2007.

With that kind of loan-to-value ratio, some lenders either are refusing to refi—or they’re giving us lousy terms.

But that’s not the end of the story.

We now know that we have a stellar credit history and payment record—and we believe the appraisal of our house is simply wrong.

The widespread use of computerized appraisals by banks—based on local real estate sales and other anonymous aggregated data, not in-person property assessments—are creating artificially low valuations. Often they contain errors.

We have options: First, we can insist that lenders send a live appraiser. Or, we can offer to pay for one ourselves. We can also demand that lenders review our case on its individual merits, and not rely on robo-appraisals.

Last, I heard some great news today, oh boy: the Home Affordable Refinancing Program (HARP) is going to expand soon, to help qualified homeowners like us refinance while rates are still super-low.

Even folks whose mortgages are up to 25% higher than their homes’ value might qualify.

If you have any advice for me, I can’t wait to hear it.

Take a cut. Got any refi tips? Share them!

Join the Discussion