Refinance Scams – A Few Things To Watch Out For When Refinancing Your Mortgage
Refinancing your mortgage is a big decision, and one that shouldn’t be made blindly. Here are a few things to watch out for when refinancing your mortgage.
Beware of a broker that is reluctant or refuses to disclose their YSP, or “yield spread premium”. That term refers to the amount of money the lender is giving to the broker in exchange for charging you a higher interest rate or enacting a longer or more severe pre-payment penalty. Statistically, unsolicited refinance offers have a much higher likelihood of coming from “predatory” lenders.
Be careful–all Good Faith Estimates are just that; estimates. They are all subject to change.
RESPA (Real Estate Settlement Procedures Act, a federal consuming protecting statue first enacted in 1974) prohibits any settlement service provider from giving or receiving anything of value for the referral of business in connection with a mortgage or charging fees or markups when no additional services has been provided. Mention “RESPA” to your lender, ask for a list of fees (they cannot charge you $25 for a credit report that cost them $8.50, for example), and be candid about shopping elsewhere if you feel slighted. At the same time, blindly shopping around may keep the broker from going the extra mile for you if something goes wrong and he/she feels that you haven’t placed faith in them.
Trust your gut. If something about your refinance transaction consistently feels wrong, there’s a good chance it is. Many lenders will gloss over the fact that you have a “Right of Recession” where you have from the day the loan closes until midnight three days later to cancel the deal, and you cannot be fined for that termination (except for losing any out of pocket expenses, such as an appraisal). That being said, almost everyone feels some sort of “buyer’s remorse” soon after closing a major financial transaction, even if that transaction is in your best interest.