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Mortgage Q&A: Refi offer raises red flags

- The Washington Times - Thursday, September 16, 2010

Well, folks, they're back. I just received a mortgage refinance solicitation letter that made me want to throw up. The words at the top of the letter, in giant calligraphy, boast, "Mortgage Reduction Notice." The next line, in bright red letters, screams out: "Act Now - 3.625% with a 3.875% APR."

The body of the letter informs me that I may refinance my mortgage and roll in any credit card balances I may have. It then tells me what those balances are. I scan for the fine print and discover "all consumer information gathered by Equifax." On the reverse side of the letter, more fine print tells me I "appear to satisfy certain credit requirements derived from information contained in a prequalifying report received from Equifax, a credit reporting agency used by us."

OK, so the credit repository is selling my personal financial information to the mortgage company.

The letter continues to tell me I should consolidate my credit card balance and roll it into my mortgage. It promises to reduce my monthly outlay by approximately 40 percent. In big, bold, italic letters, it prods me to "Call Us Immediately!" It also reminds me in underlined capital letters that I will have "no payments until December 2010!"

At the bottom of the letter is a "Funding Voucher" from the "Cash Advance Division" that looks like a check, reading, "Pay to the Order of William H. Savage Jr.," with my address printed below my name and the amount of my mortgage and credit card balance as the amount of payment.

I continue to look through the fine print and notice that the 3.625 percent rate represents a 5/1 ARM - a program in which the rate can adjust after five years. The last classic bit of high-pressure selling is the threat: "William H. Savage Jr., respond within 72 hours or risk losing your funding."

One would think mortgage companies and consumers alike would have learned their lesson in the aftermath of the unprecedented mortgage meltdown. I guess I need a dose of reality, but I sort of assumed the credit crunch, coupled with the new cumbersome and intense licensing requirements, would have weeded out many, if not most, of the sleaze in the mortgage business. (I would be surprised if many American homeowners would fall for such a letter.)

Rates are low, and refinance opportunities abound. I've said it many times, but if you don't already have a good mortgage loan officer, ask trusted friends, neighbors or co-workers for a recommendation. This is the best way to find an honest, knowledgeable and reputable loan officer.

Part two of this subject is for next week, after I call these guys and see what they have to say when I tell them I might be interested in a refi. Stay tuned.

Henry Savage is president of PMC Mortgage in Alexandria, Va. Send e-mail to henrysavage@pmcmortgage.com.

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