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I find this less repugnant than the government financing modification of loans with 2% 5-year teaser rates. That just kicks the can down the road.

At least this way, we know you meet the DTI ratios for a 4.x% 30 year fixed rate loan & can meet your obligations going forward fully documented.

Its sickening that the government is offering the equivalent of Option Mortgages to those it financed the modification of loans that they clearly can't afford now at historically low rates. If they can't afford the loan today at 4.x% rates, they never will. It'll take another 5 years for them to realize that when their loan resets to market rates.

I think a commenter on Mish's blog hit the nail right on the head: They are only offering these too good to be true free refi's to those who they don't have clear title on (they lost the note). They refi you & all of a sudden all the documentation is in order without you suspecting anything.

Juan, its common. WFB wants to retain some of their paying customers instead being pinched by the competition and lose out on future revenue. Would you have done the same if Chase or BoA gave you the same offer ? The same was being done some years back with Credit Card holders, getting lower temp rates on transfer of balances to their bank accounts.
No difference, just competition !

Thomas is correct--there is nothing nefarious here. They probably made money on the deal as well. Just like you can pay points to lower the rate, you can raise the rate and get money back. Give him a slightly higher than going rate--still lower than his current rate--and use the money to pay the closing costs. And WF probably had some left over for profit.

another reason they did it may be to move you from non-recourse to recourse

I also wondered if there was something about the original loan that put the lender at risk. So they wanted to get rid of that loan. But, if you are happy with the rate and terms and you READ ALL THE DOCUMENTS YOU SIGNED, then you win.

I suggest you run the numbers on a rate calculator to evaluate whether prepaying on your principal makes sense for you. If you're planning to stay a while, you can save interest and shave years off your loan term by scheduling extra principal payments into your budget. I wish had started this practice years earlier.

Soozy says

another reason they did it may be to move you from non-recourse to recourse

Good point. Juan, can you comment?

Or does anyone know whether a refi automatically becomes recourse loan, even if you take no cash out in the process?

justme says

Soozy says

another reason they did it may be to move you from non-recourse to recourse

Good point. Juan, can you comment?
Or does anyone know whether a refi automatically becomes recourse loan, even if you take no cash out in the process?

Unless you specifically ask for and make sure you get a non-recourse loan on your refi, then they'll most likely push a recourse loan on you. You need to negotiate it, it's no longer automatically non-recourse like when you first got a loan to pay for a house. Now you're getting a loan to pay another loan, even if there's no cash out or payoff of a second recourse mortgage with it.

Most people don't realize this when they refi. Heck, most people don't even know what a non-recourse loan is since they would never expect to be in a situation where the price of real estate goes down...not since 2006 have people cared about "recourse" vs "non-recourse".

Soozy says

another reason they did it may be to move you from non-recourse to recourse

SHAZAM I bet dimes to dollars this is the reason., As now it CAN'T BE A PURCHASE loan, as you said, it is a NOW a REFI and therefore RECOURSE even in a NON RECOURSE state... That could be one big reason, the other BIG reason, could be some thing might have been "improper" on the first loan?

Mark_LA says

I think a commenter on Mish’s blog hit the nail right on the head: They are only offering these too good to be true free refi’s to those who they don’t have clear title on (they lost the note). They refi you & all of a sudden all the documentation is in order without you suspecting anything.

THERE IT IS... THERE IT IS... THERE IT IS... I say between the recourse and getting all docs in order wala you are doing them a favor, I am wonder if you could challenge and make them PROVE THE PAYOFF went to the LAST NOTE and or TITLE I am talking as a nincompoop now, but you understand what I am saying.

I have a wf loan, refi'd with minimal charges. Dropped my interest from 6% to 4.3%. I don't think there was anything suspicious about the refi you mentioned - just that they have a good paying customer and can keep them by refi rather than lose them to another company.