"With interest rates being lowered a tad and with the relaxation of Fannie Mae and Freddie Mac’s lending guidelines, there’s been a recent advertising push by loan brokers about this being a great time to consider refinancing your home mortgage.
For some folks who are simply looking for a deal better than the one they have, refinancing may be a good idea. For millions of other homeowners who are struggling with their mortgage, refinancing may not be an option at all, or even if it is, not the best option available.
Consider David’s case as an example. When he first came to see us in December 2013, he was already almost $25,000 behind on his mortgage payments. His loan had been assumed by the FDIC as part of a takeover of the bank he originally borrowed from, which went out of business. If being so far behind in his payments wasn’t bad enough, worse yet for David was the fact that his loan actually came due in full in December 2012.
Indeed, there were several major strikes against David in terms of being able to save his home when he first came in our door. Yet, like millions of other homeowners with troubled mortgages, refinancing was not a practical possibility, given his circumstances.
In addition, there were openings for David to argue that foreclosure should not be granted under the circumstances of his case. For one thing, his mortgage appeared to be defectively executed. Another hurdle of a sort in this regard was created when the FDIC sold his loan to another entity. In our experience, every time a loan is sold, there is more of an opportunity to successfully challenge the right of the purchasing entities to collect on it.
In the end, things worked out amazingly well for David. Fortunately, we were able to able to work out a loan modification on his behalf which meets his needs and will keep him safely in his home for years to come. That modification includes a reduction of his monthly payments of principal and interest by almost half, from $2,000 down to $1,250.
In addition, his loan balance was reduced by almost $80,000, from $344,000 to $260,000. Most importantly, his loan, already due in full when he came to see us, was rewritten to be paid over 40 years. No refinance could have done that for David.
So, if you have issues on your mortgage, you may want to look hard at a mortgage modification before assuming a refinance is the only or best option for you.
Daniel McGookey is an attorney with offices in Columbus and Sandusky. Kate Eyster contributed to this column."