walkitout (walkitout) wrote,
walkitout
walkitout

more yammering about refis

I've been over this ground several times now, and barely remember what I might or might not have said, so here's a summary:

in at least some states, when you use a mortgage to buy a house, that mortgage is set up in such a way that if it is foreclosed upon, the lender can't come after you for a deficiency judgment (non-recourse loan). Refis, generally, are not set up this way (do people have any idea when they sign away this, to me anyway, valuable feature?)

many refis have prepayment penalties

blah blah blah

http://calculatedrisk.blogspot.com/2008/06/wachovia-waives-refi-fees-for-pick-pay.html

Wachovia has a particularly heinous loan product called Pick-a-Pay. You get to decide which of three (I think) payments you make each month. IIRC, one is an interest + principal payment, one is an interest only payment, and one doesn't even cover the interest (negative amortization, or NegAm). The negative amortization feature is only available up to a certain LTV (loan to value: something like 120%, I think, but please do not hold me to this). Once you're in that deep, you're stuck with the other choices (interest only, or interest + principal), and don't forget: the bigger the amount you owe, the higher the minimum interest payment. Plus these are ARMs that tend to adjust upward and not downward.

And on _top_ of all that, you couldn't even refi out of these disasters without paying a penalty (altho given how bad they were? The penalty would have to be substantial to stop one from getting the hell out of this if you had any alternative at all). Wachovia (probably sensing they're about to go down in flames for a wide variety of reasons) is buying themselves a tiny amount less bad PR by waiving the prepay penalty.

Good? I wouldn't go that far. Marginally less evil? Ok. I'd agree to that.
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