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Unsolicited Offer from Wells Fargo for Free Refi


               
2010 Oct 14, 1:46pm   2,698 views  11 comments

by juan   follow (0)  

i got an incredible sounding call from my well fargo (WF) mortgage broker a few weeks ago. WF offered to reduce my interest rate to 4.375% and reset my 30 year fixed mortgage to a new 30-year fixed, for free.
now that the deal has closed, i haven't found any gotcha; no closing costs, no prepayment penalties, just a lower rate. even the WF notary did not charge us.
besides myself, a co-worker was refi-ed in july. another co-worker got a call from B of A at the end of september offering to refi his mortgage for free.
i bugged the broker about why he thinks WF is doing this. he said they are trying to refi 100,000 loans per month. even though my mortgage wasn't at risk, the 'system' does a sweep of all loans and picks some for the offer.
mish had a post on this also....strangely the day i got the call from the wells fargo broker.

http://globaleconomicanalysis.blogspot.com/2010/08/benevolence-by-jpmorgan-jpmorgan-offers.html

i am suspicious that the government is underwriting some of the cost of the transfer. there is the obvious underwriting in that the fed is buying mortgages to drive down the rate. the other, is whether some federal office is paying the bank per refi. evidence of this second type of underwriting would be if these deals go away after the election. afterall, this is a stimulus program. my mortgage payment is lower, so i could spend the difference.

#housing

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1   Mark_LA   @   2010 Oct 14, 3:10pm  

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.

2   Mark_LA   @   2010 Oct 14, 4:04pm  

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.

3   thomas.wong1986   @   2010 Oct 14, 5:39pm  

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 !

4   tatupu70   @   2010 Oct 14, 9:27pm  

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.

5   Soozy   @   2010 Oct 15, 12:05am  

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

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