Mortgage rates are dropping!

By Stan Greenberg

Don't miss the opportunity! Do it now!

Refinance your mortgage! Save money!

A feeding frenzy has been started. People who have been calmly paying on their monthly mortgage feel they are missing the boat. They are made to feel they are overpaying grossly. The world seems to be passing them by. They are an anachronism. All the world is getting a bargain and they, alone, are paying the highest price.

Before you jump into the refinancing avalanche, let me give you a personal insight. This may or may not cause you to refinance your mortgage, but it will give you a better look at the playing field.

• Current rates for 30-year fixed mortgages are in the 7 1/4 to 7 1/2 range.

• The recent declines in rates are due to an October stock market fall. Investors sought shelter in bonds. That drove bond prices up, and yields down. Mortgage rates often track the rate on 10-year Treasury notes, according to New York Times writer Nick Ravo in his article, "In Refinancing, Homeowners Find a Source for Saving" (11/16/97).

• The Federal Reserve is not likely to raise short term interest rates, due to decline in stocks.

• There is not much more room for interest rates to fall in our growing economy, stated HSH Associate Keith Gumbinger in Ravo's article.

• If there is an increase, it will probably be less than eight percent.

• One year adjustable rate mortgages (ARMs) rise quickly from the present rate at 6.65 percent, after the first year.

• Points: Each point is one percent of money borrowed. Each back or lender uses points to make sure it gets enough money for the refinancing process.

I will tell you about the loan I am in the process of receiving from a well-known bank.

On the day before I requested the refinance I was a solid citizen. I had made every mortgage payment on time. I was never late and the bank trusted me implicitly. It also trusted my Title company, the previous appraisers and my Internal Revenue Service record. The bank thought that I was a really fine, upstanding, financially stable gentleman and scholar.

The day after I applied to refinance I was one of the "usual suspects." Nothing was valid.

1. The house had to be reappraised. Why? It was the same house for which it had loaned me money, and thought was perfect the day before. I asked for the exact same amount of money that was due on my mortgage. No increase. The balance of my debt!

2. The Title had to be rechecked. Why? Yesterday the title was sufficient. I had not done anything to deface or destroy the property. It would know about any new loans or second mortgages. Why recheck and pay for a new Title search?

3. My credit was good yesterday. Why all the new payroll stubs and two-year tax returns? When did I become an irresponsible person?

Did new bank fees have anything to do with all this searching and rediscovering? Possibly? Probably!

In the previous 10 years I had not moved from this house, I had not changed my name, I had not divorced my wife or done anything remotely exciting.

Let us now examine the bank!

1. The bank has changed its name three times.

2. All new employees are now working at the bank.

3. The New York Stock Exchange value of the bank has fluctuated enormously. It has gone up and down in a 30 or 40-point range. Not very stable!

4. They closed down about 100 branches all over the country. Not a very pleasant picture!

The bank could not pass its own financial test!

I am not anti-bank. Some of my best friends work for banks.

The refinancing process left me with a bad taste in my mouth and wallet.

The loan is 20 percent of the market value of the house. If I default, the bank will have no problem in getting its money. The house is worth five times what it is loaning. It can sell it just for the loan price.

To the banking community I ask and state: "I trusted you. Why can't you trust me? Cut the paperwork and the excessive fees on refinancing!"