refinancing usda subsidized loan need quick answers please!

[baker10]

My husband and I ( living in OHio) are in the process of refinancing a usda rural housing service loan. Our objective is to cash out equity for home improvements and loan cosolidation. The biggest problem has been the subsidy recapture. Originally, when we requested a payoff, the subsidy was requested to be paid off, which left so little equity to work with that it really wasn't worth it. So we originally turned down the offer.
Apparently,if you want to cash out , you have to pay back the subsidy. A straight refinance would allow for the subsidy to be added on as a lien to the property until we no longer reside here.

Not one to give up, I called the usda office and asked if they would make and exception if we used the cash out for home improvements. The rep said that it could be done and to have my lender request a subordination packet and send it back with a bid from the contractor on the home improvements. We did this today. If they approve it, we can defer the subsidy and the loan would be worth our time. My first question is "Has anyone had experience with refinancing a usda loan and had similar challenges?"

The next situation is that my lender called me today and said that we could still close the loan tomorrow and get it going and if we changed our minds during the recision period, we could back out. He said that way if they took the subsidy off, it would close faster and we would get our money next week, which we really need right now. I am wondering how we can sign closing papers and get a different amount of cash out if the subsidy comes off. I am also wondering how hard is it to back out. We definitly will want to if we can't get the subsidy off and get more cash out. This whole situation has been extremely stressful. I have never done this before. We don't want to make a mistake and lose our house. Sorry so long and thanks for any advice! Baker10

 

[MortgageGuru]

I need more information in order to know exactly whats going on. When did you buy your home and what was the purchase price? What was the loan amount and the interest rate? How long have you taken the full subsidy, or partial subsidy? How much are your escrows each month? What did the house recently appraise for? What is the loan amount the lender is doing for you? What is the interest rate and is there a pre-payment penalty on the new loan? How good is your credit?

 

[baker10]

We purchased the home ten years ago. The loan amount was 69,900 at 8.25 % for 33 years. The home is now appraising at 107,000. Our payoff with the subsidy still on is 82, 900. If the subsidy gets deferred it will be around 73,000 to pay it off, which will allow us about 9,000 more in cash out. Our credit score is low to fair, only in the low 600's. The first offer that I received after knowing the full payoff was a loan for 90,000 at 7.75% with 4500.00 cash out. We turned that down. Then after we sent in the subordination packet with the contractor bids to try and get the subsidy off, he called back and said that we could get 6,000 in cash out on a 90,000 loan but the interest rate would go up to 8.5%. He says he could get more cash because his head underwriter allowed him to take off more fees because he , the underwriter, said that he never saw a subsidy get deferred. He wants us to close today so that we will not delay getting our cash out and so it will close before the end of the month. He said that the rates could go up higher as well if we wait. We agreed only because they said that they would know on Monday if the subsidy comes off and we have decided to use our right of recision if the subsidy does not come off.
When I spoke with a representative at Rural Housing, she made it sound as though as long as we got bids showing we were doing home improvements with the money, it shouldn't be a problem. Although, of course, she couldn't guarentee it. So I know that with our credit, it is only worth if the subsidy comes off and we can get more cash. I need to know what to do if we need to back out. Do they need to change the contract to allow more cash out if the subsidy comes off after we sign. I don't understand how that works. I am so nervous about closing today. We got ourselves in a bind and really need the cash and we are late on our payments to usda, so if have to back out, we will have to get completely caught up on our payments or risk losing the house. I have a disability and can't work right now and my husband is a contractor, so our income is unpredictable. We had planned to take some the cash and put it back for extra house payments and taxes so we could make it easier to stay on our feet. Thanks again for any help and a little prayer that our subsidy comes off and we can get back on our feet would be appreciated. Baker10

 

[baker10]

I think we may have gotten a better deal today. I called the lender and told him that 8.5% was not an acceptable offer. So we decided to go with a credit comeback loan with a fixed rate of 7.3% for three years. We will only have a prepayment penalty if we payoff in less than two years. We can get a little more cash back as well. He said that our credit was 635 and if we keep our payments on time, we should be able to refi with a local bank before we go to a variable rate. We are still considering cancelling if the subsidy isn't deferred,but at least we have a better option than before. Would love to hear from anyone who has refinanced a usda rural housing loan. Thanks for any advice! Baker10

 

[MortgageGuru]

Listen, here it is pure and simple. That subsidy is not going to be deferred. If you get the cash out based on the home improvements to be made and don't do them it is called mortgage fraud and you could have your note called due by the lender at any time. You are in a bind because every day you wait you are having to fork up more money to get caught up. However, it isn't uncomon. Based solely on what you've said on this forum, I would recommend a 2 year fixed with no pre-payment penalty. Your rate should be in the low 7's depending on how late your mortgage his right now. Also, if you have already signed the paperwork then you will need to recind now and have them rework the loan and resign it. With your credit scores where they are at, you should be able to do a rate and term refinance once you have 12 months of no mortgage lates over 30 days.

 

[baker10]

Actually, we would definitely use the money for home improvements. My husband is a contractor and can do the work himself. We would even let them verify that the work was done if neccessary. I wrote a letter to the payoff department today explaining that. I am going to fax it over first thing in the morning. Hopefully, this can sway them. We ended up with rate of 7.4% fixed for the first three years with a 2 year prepayment penalty and intend to work hard to keep the mortgage current so that hopefully we can refinance after the two years with a local bank at a better rate. Thanks for your advice. I will post back about the subsidy decision. Baker10

 

[baker10]

We actually did get the subsidy deferred, but it was extremely complicated. The mortgage company and USDA had to have their guidelines match up in order to approve it. There were two denials and finally an approval after going to the payoff dept supervisor, who had to go to HER supervisor. Then we had the issue of how to access the money and finally got it all straightened out.

The mortgage company had one day left to submit the subordination papers and final payoff before the loan was funded and then couldn't get USDA to send the correct payoff amount. So we finally got them to send the correct payoff statement and everything was great..UNTIL.. my lender called and said that the funds had already been sent to USDA with the original payoff amount , without the subsidy taken off, and there was not way to stop it. So now we have to hurry up and submit all the subordination approval papers and hope that USDA will refund the overpayment. I did speak with a customer service rep and she said that they do have a procedure to refund overpayments. So I hope this is not another big hassle. The people at USDA and our lender, New Century, have bent over backwards to get this approved and worked out. I can't imagine that they would refuse us the money because of this mixup. I know that after going through all of this, I won't give up until we get the money back so that we can fix up our house like we planned.

This whole experience has been a nightmare, one day everything is fine and the next thing you know, it's not working out. However, we got this far, now it's almost over. I would highly recommend New Century mortgage. Even after the loan closed, they have been doing backflips to get us what we needed. USDA has been very helpful as well.

 

[MortgageGuru]

Mr. Baker, you're a f^%$#*g idiot. You came on here looking for advice because you thought something was fishy with the deal you were offered. Then, the Loan Officer told you EXACTLY what you wanted to hear so you went for it, against the advice listed above. You might as well have went to a car lot with a mechanic and took the salesman's word over the condition of the car instead. The LO pacified you until the loan funded, at which point there isn't a thing you can do about any of it. The paperwork you signed said nothing about getting the money back from USDA or New Century. Ask yourself something here. If all these people went so high up at USDA to get the subordination approved, then how come there was never a new payoff statement released? It's because it never happened.

I did speak with a customer service rep and she said that they do have a procedure to refund overpayments

Yes, Monthly mortgage payments. Have you seen a signed subordination agreement yet?

The people at USDA and our lender, New Century, have bent over backwards to get this approved and worked out.

How do you know? Did your Loan Officer tell you that?

we got this far, now it's almost over.

No. It was over the minute you signed the paperwork.

This whole experience has been a nightmare

Wait until you are making payments on it with nothing to show for it.

 

[baker10]

Yes, I actually have seen the new payoff statement. The only problem was that New Century's title department needed it worded differently. When I spoke with the customer service rep at USDA, she went over NUMEROUS notes on my accounts that referenced conversations between my loan officer, his manager, and his processor trying to work out an agreement BEFORE, DURING,AND AFTER closing and even after it funded! So yes I do believe that they have bent over backwards to help. Also, why would I make mortgage payments to USDA for an overpayment to them. FYI I am MRS. BAKER and am NOT an idiot! Baker10

 

[baker10]

Almost forgot, Yes, the papers at closing did say that we were getting cash back, the AMOUNT was contingent on the subsidy coming off and the amount without the subsidy coming off was in the paperwork that we signed. Also, you suggested that we get a fixed two year in the low seventie and I got a fixed three years at 7.4 %. My loan officer did not even have to return my calls after we closed. However, he has answered every call, kept in close contact with me and even faxed me copies of anything that I asked for from USDA correspondence with them. I was even given an extra chance beyond the three day recision period to cancel the loan when we didn't know if things were going o go our way. I am very happy with the service that I have received from New Century. It was a nightmare because of trying to get the subsidy off. There are a lot of guidelines that have to match up. If New Century hadn't gone out of their way, it would have been much harder for me to get approved. I would recommend them anytime to anyone. I realize that not everyone has a good experience and you have to be really cautious. However you have to be cautious with anything unknown, because you don't know immediately in any situation what kind of people you are dealing with. A good example would be on the internet. I wouldn't base any decision solely on advice from someone who I know nothing about. Thanks! Baker10