CFAH

From a plugged-in reader:

Just got a letter and a call from Wells Fargo offering a 1/2 point reduction in our 30 year fixed jumbo-conforming loan ($720K) through October 29th. Our rate would go from 6.375 to 5.875 at no cost to us – no points, no fees, no nothing. Seems odd to me and I can’t figure out why or how Wells Fargo is offering this.

Our cynical side calls into question the great recourse versus non-recourse debate for refi’s in California. Our less cynical side wonders if they’ve held the paper, you’re performing, and they don’t want to take the risk you’ll walk away.
And our wisdom is to let others chime in.
UPDATE: From a plugged-in Wells Fargo Loan officer:

Sorry to say folks that this offer is being made to only a very very few select loans on Wells Fargo’s books. The reason is that there is some reason in the loan file that makes these particular loans unable to be sold. This can be for such reasons as a missing signature on a loan document, or some other clerical type issue.

The fix is to offer these folks an offer that really is too good to be true, but is. Talk about bank error in your favor! Especially since current rates for the same loan today are over 6.5% with the client paying all the closing costs.

So if you’ve gotten a phone call or a letter, consider yourself one of the lucky ones and grab it! If you haven’t received a letter or call, don’t bother trying as this program cannot be offered to you.

And props to a plugged-in “diemos” for being pretty close.

Comments from Plugged-In Readers

  1. Posted by Prime

    Take it, it’s free money. Several people I know have received this offer from Citibank. They don’t want you to default or move your mortgage elsewhere.
    They can also do this b/c they still OWN your mortgage, and have not sold it off to the MBS market.
    This will put pressure on all other banks to offer similar deals (usually for a minimal fee like $200-300).
    It is a beautiful thing getting something when you don’t need it. Take advantage. With inflation going to rocket upwards with all this money printed, you want to have as much debt as possible to buy/carry an asset.

  2. Posted by ex SF-er

    My mortgage is through Wells Fargo. Maybe I should see if they’ll do that for me.
    That said, my mortgage is only 5.25% so I doubt they’d go much lower… but I’m calling to ask anyway.
    I’m definitely jealous.

  3. Posted by Prime

    OP – Can you let us know how long you’ve had your mortgage for before Wells came in with their sweet deal? Thnx!

  4. Posted by cse

    Are refinancings not covered by the Cal. statute providing that mortgages on owner-occupied buildings of 4 units or less must be nonrecourse?

  5. Posted by dub dub

    Six months ago, I would have said something like this was “impossible”. Amazing!

  6. Posted by Friday

    From my experience, Wells Fargo has been primarily a portfolio lender in San Francisco. They didn’t sell their loans. I think it’s a legitimate effort to keep you with them but at a lower rate. I’d investigate. I got an offer to fix my equity line interest rate a year or so back when the rates were going up. I locked at 6.75% (rates on equity lines went to above 8%), then I unlocked once the rate came back down. The bank made the suggestion similar to this mortgage offer. The key is to be ACTIVE in your finances and realize when it makes sense to lock and when to unlock (in the case of my equity line). I don’t feel smart, just glad that I have time to read and research my financial decisions. The rest is up to fate these days!

  7. Posted by OP

    Prime: We’ve had it since April 2008. We have an appraisal scheduled for today and I’ve been told that the refi will probably close mid-November (apparently they’re taking about 45 days to close, so it may be a bit later than that).
    Since starting the process this week, I’ve received two follow up calls from different Wells Fargo reps wanting to make sure I’m aware of the offer. They seem to be pretty aggressive about this (and lacking a good system to track people who are already in the process).

  8. Posted by ester

    Editor,
    two thrums up for posting info like this. I have 4 mortgages with Wells Fargo, and I am going to give them a call, alought I think all 4 are already below 6%.
    Last night on “nightly business”, Pulte Home CEO came up and said that he saw the ultimate solution lies at “give everybody 4% for 30 yrs fixed”.

  9. Posted by Michael L.

    EYES WIDE OPEN when dealing with Wells.

  10. Posted by tipster

    They are likely going back to each pool of loans, checking income and credit more thoroughly, and cherry picking off the very low risk homeowners. The pools of loans that still contain the higher risk groups will get sold off to the government.
    You probably have easily verifiable, steady income from employers who they consider low risk of layoffs, or otherwise meet some formula for which they are looking.
    The loan WILL go to no recourse, but I doubt that’s the primary driver here. It’s just another element of the risk reduction of the pool they are going to keep.

  11. Posted by Publius

    cse –
    There is a common misperception among real estate professionals that refinancing will remove the protection of the antideficiency statute because a refinance is not “purchase money.”
    Different parts of the statute deal with judicial v. nonjudicial forclosure. Nonjudicial foreclosure occurs where the lender has a power of sale clause in the contrant and is accomplished by a trustee’s sale. This is very common in CA and the purpose is to avoid the expense of court action. Under the nonjudicial foreclosure section, no deficiency judgements are allowed even if there has been a refinance.
    A lender, however, may opt for judcial foreclosure as an alternative. This requires court action. Under this part of the statute a lender may not obtain a deficiency judgement for “purchase money” transactions. This is the tricky part. There is a very old case that states that a refincance is not purchase money under certain circumstances. A more recent case suggests that a refinance with the same lender for less than or equal to the original purchase price is still a purchase money transaction. Under the policy identified in that case, a refinance with a different lender for less than or equal to the original purchase price is probably purchase money. No recent case has directly addressed whether a refinance for greater than the original purchase price is purchase money.
    The argument over what is and what is not a purchase money transaction is largely a red herring. In practice, most CA foreclosures occur as trustee’s sales and a deficiency is not allowed under those circumstances whether there has been a refinance or not.
    This is not legal advice; if anyone is facing a foreclosure please consult your own attorney.

  12. Posted by diemos

    most likely this is to convert otherwise solid borrowers with low documentation loans to a full-doc situation so that the loan can be packaged and sold off.

  13. Posted by enonymous' doppleganger

    we’ve been down this road before…
    https://socketsite.com/archives/2007/08/a_few_points_from_a_local_mortgage_banker_no_not_blogge.html
    the archives do have some value!

  14. Posted by fred

    EVen if the bank charges no fees, look into gov. mandated fees, recording costs, tax implications etc.

  15. Posted by eddy

    Lower interest rates are great for the borrower esp if there is no cost. But don’t pretend like this isn’t a reflection of the devaluation of the underlying asset and their attempts to drive equity into homeowners portfolio thereby making you less likely to fail.

  16. Posted by anon

    I heard on the news yesterday that indymac, now run by government, has sent out 15,000 letters to borrowers to restructure their loans. They said about 3,500 have accepted. Interest rates as low as 3% to keep borrowers in homes. I have no idea if it’s to all subprime/forclosures?? I wonder if other banks have started to do the same and are including stronger borrowers as well?

  17. Posted by view lover

    I’ve taken up a similar offer in the past, but the cost of the appraisal may still have to be paid by the borrower. But the savings in one month were worth it. There really was nothing else as fees when I took an offer like that in April.

  18. Posted by anon

    That is weird news with Wells, especially since their APR today on a 30-year fixed jumbo is 9.808%!!!
    https://www.wellsfargo.com/mortgage/rates/

  19. Posted by Trip

    Curious. I wonder if this is limited to those with junbo conforming loans. That segment took a few months to get moving and is soon to disappear (a bit). Perhaps Wells can now sell these loans at far better terms than they could before so they now want to convert prior “un-sellable” jumbo conforming loans to the “sellable” terms and come out ahead even if the homeowner also gets a little bonus.

  20. Posted by anon

    This is a scam, of the bait and switch variety!
    In my experience, and my neighbor’s as well, at least. Here’s the tale:
    Wells Fargo contacts with the free refinance offer. Sends out their own appraiser. Appraisal comes in a bit on the low side (I had an appraiser out a matter of months prior for tax purposes – I know values are continuing to slide but not THAT much). Then they inform that you do not meet the criteria for the free refinance – the number one criteria being 70% – 80% LTV depending on your locale. And so, the switch: Wells Fargo says they can still give you the “free” refinance if you kick in the cash to bring your loan down to 80% or better, or they offer a points, fees, etc. refinance.
    So, even if you purchased a year or two ago with 20% down – and assuming your home has lost value since that time (ummm…I’m guessing it has) – Wells Fargo is just trying to get you to pony up some cash to ensure you still have 20% equity.

  21. Posted by Jack M

    If you’re a good customer, making on-time payments and Wells is offering to reduce your rate, then I have to believe that they have figured out a way to make money doing it. Perhaps, Trip is right and they can sell them at a profit by reclosing them as conforming jumbo loans.
    Banks have too many bad loans to worry about; therefore to just offer good customers better rates without a profit motive makes no sense.

  22. Sorry to say folks that this offer is being made to only a very very few select loans on Wells Fargo’s books. The reason is that there is some reason in the loan file that makes these particular loans unable to be sold. This can be for such reasons as a missing signature on a loan document, or some other clerical type issue.
    The fix is to offer these folks an offer that really is too good to be true, but is. Talk about bank error in your favor! Especially since current rates for the same loan today are over 6.5% with the client paying all the closing costs.
    So if you’ve gotten a phone call or a letter, consider yourself one of the lucky ones and grab it! If you haven’t received a letter or call, don’t bother trying as this program cannot be offered to you.

  23. Posted by Marc

    Wouldn’t this re-amortize the loan? If you’re already 5 years into a 30 yr loan, you’d be making payments for 30 more years rather than 25.

  24. True, but you can always pay larger than the required payment in order to pay it off within the same 25 years. You will still save lots of money. Ask your loan officer to give you the fully amortizing payment for 25 years or however many years you want to take to pay it off.

  25. Posted by TheBanker

    All, what you are hearing about is called a loan modification. This will not be the last time you hear this term. It is not only for lower credit quality borrowers, it is anyone in hardship. Defined, this could be value drop, job loss, asset loss(401K), you name it.
    This is to retain as much as they can with getting jingle mail. . .keys in an envelope.

  26. TheBanker, this is NOT a loan modification, but a completely new loan. It is merely an inducement for the borrower to rewrite a new loan that Wells can then remove from the books.
    Were it a modification, Wells would not be soliciting this, but rather would consider the borrower’s situation case by case. Borrowers with loans that they want to modify will have to both prove the harship and prove that they will still be able to meet the modified obligation.

  27. Posted by SFwatcher

    I heard GM CEO wants govt to give “0% down, 0% interest for anyone who wants to buy a car”. He has no other intentions than to see that everyone enjoys the american dream of driving a new car…

  28. Posted by Prime

    Wells Fargo loan office – You’re wrong. This is a loan mod. Citibank has its own Loan Modification department and is charging $300 if you want to lower you rate if they still have your mortgage on the books. It’s for better customers, and also, the duration of the loan does NOT reset. It’s all 30 yr amortizing from the first day you start. Trust me on this.

  29. OK, Prime. Perhaps you should check with the poster of this information.
    Yes, there are loan modifications done, but I can assure you, Wells Fargo ( and I would surmise any other lender) is not calling and/or mailing our borrowers to volunteer to lower their rates. If this was a modification then you would be correct in that it would not change the term of the loan.
    I think the readers of this site are more helped by facts, not opinions. I put my name as Wells Fargo loan officer to indicate that the information I am delivering is “straight from the horses mouth”.
    [Editor’s Note: Cheers. And thank you for plugging in.]

  30. Posted by ester

    WF loan officer,
    either way, I am very disappointed with what WF is doing here. I called my contact person in WF (I have 4 mortgages with wf) and she told me that 8 out of 10 people who got the letter could not qualify for the refi, so why bother??

  31. Hello ester,
    I fear that your WF contact might not be “plugged in” to this particular initiative. This is not something that is done on the retail banking level. There really are not that many loans that are covered by this particular situation.
    As for qualifying, yes the borrower would still have to qualify financially as the goal of this is to be able to move these loans off of Wells Fargo’s books. If they no longer qualified and we made the adjustment, we would still be sitting on a loan that couldn’t be sold.
    Editors: You’re welcome, happy to help. I didn’t realize there would be so much activity! Maybe a whole new category…

  32. Posted by ester

    WF loan office,
    I heard what you said, but apparently, WF is then NOT baking in how customer would feel about this – you got a letter, and then you are turned down.
    Naturally, if you got the letter, you would assume that they checked everything and decide that you qualify.

  33. Posted by diemos

    Grow up ester.
    WF is a business, not your mother. They’re not there to kiss your boo-boos and make you feel better. They identified mortgages that had documentation problems that were interfering with their profitability and contacted the borrowers to see if they could implement a fix that would help WF’s situation. As with all businesses they are there to look after their own interests, not yours.

  34. Posted by tipster

    Ester is right. I’d be livid if I actually had to “qualify” for a loan. This is Amerka, where everyone is *entitled* to a loan. Qualify? Where do they get off?
    8 out of 10 people who got loans won’t qualify for one now? I cannot imagine what that will do to prices, ester, but you might want to keep that little statistic under your hat.

  35. Ester,
    I can understand your thinking, however it is impossible for the bank to know what your CURRENT financial status is. The basis that we approved your loan on in the past was based on information that you provided via your loan application and supporting doucments, paystubs, w2s…. We cannot know if you have had a job change, increased your debt, lowered your cash reserves…. with out receiving an entirely new loan package.
    Also, rest assured that the other poster’s information re 8 out of 10 being turned down is completely false.
    One other thing Ester, thank you for your continued business relationship with us. It is appreciated and if the interest rate market makes it favorable for you to refinance, please do call your Home Mortgage Consultant and ask her.

  36. Posted by ester

    that 8 out of 10 info is not from any reader here, it is actually from your loan consultant, who is in your President’s club for 17 years in a roll, and who has a big loan office here.

  37. Posted by Richard

    Wells was betting, correctly so, that rates were coming down, so they want to lock you in at a higher rate before that happened.

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