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A fee-free refinancing?

Chris Farrell Oct 28, 2010

Question: We live in Silicon Valley, where home values have remained fairly steady. In the past 12 years, we’ve refinanced many times using the same mortgage broker. We’ve always rolled over into a new 30 year fixed (no cost), and have never taken any cash out. We were about to start this again, when I received a letter from our lender (Wells Fargo) offering us a 4.125 no fee fixed 30 year loan with a very streamlined process. We’ve got extremely high credit scores and a low loan/value ratio.

My question – is this for real? I thought these programs were supposed to help those in trouble. This is a better deal than the broker offered. Of course she said it’s a bait and switch. I did the on-line application, and am wondering if I am wasting my time, or did I hit pay dirt? Judy, Los Altos, CA

Answer: I think you’re good. I checked with a colleague of mine who had the same experience, and his change in rate went through without any hidden fees or the typical bank “gotcha”. If it’s the same program he signed a few documents and that was pretty much it. He’s paying over $100 less a month on his mortgage.

I’m not sure, but I believe the rate reduction is part of the stimulus bill and it’s limited to homeowners with Fannie Mae and Freddie Mac mortgage-conforming loans. The program is designed to help out folks in financial stress, but it looks like banks are trying to balance it out with people they know won’t have any trouble meeting payments–low risk folks like yourself.

So, why not participate in the program if there really are no fees and the end result is your mortgage rate is lower? However, when it comes to a money situation like this I always like to talk to a loan officer at a branch or call the banks 1-800 number on your own to make sure the deal is legitimate. You always have to be wary of sophisticated scamsters these days.

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