I don’t usually ask for your comments right in the first sentence, but I have been talking to many clients, friends and neighbors about refinancing their home mortgage these days. And the stories have been fascinating especially since fixed rates are near 4.5% or better.

When I originally wrote the post about Virginia’s recordation tax exeption (for home owners refinance with the exact same lender) I was surprised how often that one post was viewed. And this one cost savings has been the basis for all of my starting answers to “is it a good time…” because it saves most people over $1,000.

A local real estate attorney recently (2/2011) cautioned “It’s my understanding that Fairfax County is checking the MERS website on every same-lender refi and if the website shows there is an investor (e.g. Fannie Mae) then they will not allow the reduced recording fee.”

Two interesting local refinance stories…

A couple of months ago a friend called me because Chase Mortgage (his lender) had sent him a letter stating that, because he was a good customer, that they would adjust his rate (recast) for $500. The shocking thing was that it would not require an appraisal, no new loan application or documentation was needed, and that his rate would drop over 1.5%. The offer was authentic and he signed up saving him a lot of money every month.

A neighbor came to me seeking advice. His confession of taking out a home equity line and then spending it “irresponsibly” was brutally honest. As it turned out, his loans were with Chase too. So I suggested that he contact Chase first, just to see what they could offer. And guess what, they sent him a letter agreeing to consolidate his loans at a lower rate too. he was so excited to tell me that they will save almost $500 a month.

Now, both of these people had been paying their mortgages on time and they seem like “no-haggle” refi’s, recasting really. Yes, they were living in desirable areas, Vienna, VA and McLean, VA but they were facing financial issues that could have snowballed into future problems for the bank… and they already have too many problems. But in each case the homeowner was pro-active .

It’s good business to keep existing customers

So Virginia home owners should call the 1-800 numbers on their current mortgage statements or go to their lender’s web site because, like Chase, that lender may be more flexible that you may believe. It’s worth a try.

Leave a comment about your experience refinancing with your current lender because it may give someone else the courage to take action.

The Washington Post published an article 11/4/2010 discussing how the criteria (identical lender) is even complicated for the Fairfax County clerk of the court to keep track of to make sure everything is done properly.

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In Virginia, it is essential that you start with your exact current lender.

Sure, but Doug the Internet is full of better looking deals than my lender’s web site, you say. That may be true, but the Internet is sometimes filled with people offering too-good-to-be-true deals. Don’t get me started on this topic right now because I will cover that issue later.

Again, in Virginia, if you refinance with the same lender then there is a “recordation tax exemption” for the mortgage. In my case, that would be about a $3,000 savings right off the bat! For those of you with a legal background or curiosity, you may reference §58.1-803 (D) of the Code of Virginia.

It is essential for you to know that this exemption needs to meet some very strict criteria. A local real estate attorney recently cautioned “It’s my understanding that Fairfax County is checking the MERS website on every same-lender refi and if the website shows there is an investor (e.g. Fannie Mae) then they will not allow the reduced recording fee.” So you will need to do your homework.

Bet this refi plan sounds like a good idea for those of you looking over those Truth-in-Lending Estimates right now. Everyone loves to skip paying taxes on anything if it is allowed by law, that’s the American way. But watch out for those pitchmen who say they can pull off that exemption because if it isn’t exactly the same lender then you may be going to jail for six months and paying a $1,000 fine. That will screw up your security clearance!

The refinance needs to be with the exact same lender. It has to do with being the same legal entity and subsidiary mortgage companies do not qualify. A “Division” of a bank does qualify. What?

Here are some direct examples from a recent letter from the Clerk of the Fairfax Circuit Court (3/12/09): {document was removed from site}

This is the case of Bank of America and Countrywide. According to the 10K that Countrywide filed with the Securities and Exchange Commission, the merger agreement between Bank of America and Countrywide provides for Countrywide to merge with and into a wholly owned subsidiary of Bank of America. A subsidiary is a separate legal entity from the parent company. Therefore, an existing Countrywide loan being refinanced with Bank of America is NOT a refinance with the same lender.

Other examples of transactions that DO NOT qualify for the same lender exemption are:

1. JP Morgan Chase and Chase Home Finance, LLC. (Separate entity). However, we just received a letter from JP Morgan Chase stating that JP Morgan Chase is the actual note holder for deeds of trusts issued by JP Morgan Chase Bank dated on or after January 1, 2005, which are currently being serviced by Chase Home Finance LLC. In those instances the transaction would qualify as a same lender refinance.

2. Wells Fargo Home Mortgage and Prosperity Mortgage which is an affiliate of Wells Fargo Home Mortgage. (Separate entity).

3. Wells Fargo Bank, N.A. is a subsidiary of Wells Fargo & Company. (Separate entity).

4. The payoff statement shows that wired funds are to be sent to X bank for further credit to Y lender. If Y lender is different than the lender providing the refinance loan then it is not a refinance with the same lender. We have found this in Bank of America/Countrywide refinances. The Countrywide payoff statements instruct the settlement agent to wire the funds Bank of America and to further credit MRC. MRC is MMA Realty Capital. They are an investment firm. According to our research, MRC is the current lender, not Countrywide. Countrywide appears to be servicing the loan for MRC. This would not qualify for a refinance with the same lender exemption.

Contrast this with Wells Fargo Home Loan which is a DIVISION (not a separate entity) from Wells Fargo & Company and BB&T Mortgage which is a DIVISION of BB&T Bank. A division is not a separate entity. Transactions in these situations would qualify for the refinance with the same lender exemption.

Why does the Clerk care so much about this issue? Because the Clerk may be personally liable for the uncollected money!

So now you know a little inside secret. If you are starting to look into refinancing then contacting your current lender is a must and absolutely the first call that you should make… and do your homework to make sure it is the same legal entity.

The law firm McGuire Woods posted a legal update on Refinancing with the same Lender in Virginia which is also worth reading. (I have no professional relationship with the law firm).

The Washington Post published also an article 11/4/2010 discussing how the criteria (identical lender) is complicated for the Fairfax County clerk of the court to keep track of to make sure everything is done properly.

I am looking for comments from readers who have tried to refinance and their experience… successful or unsuccessful. It may help the next reader!

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