Refinancing a property recently in forbearance

Mortgage broker:

ProMortgage.

Property type:

Appraised value:

million.

Loan amount: Loan type: Rate: APR: Backstory:

Liz Bayer,

Contemporary duplex in the Inner Mission.

$2.55

$1.243 million. 30-year fixed. 3.375%.

3.481%.

I was approached by a family who occupied, as their primary residence, one unit of their duplex. They wanted to refinance their home to consolidate their current first and Home Equity Line of Credit into one mortgage. They also wanted to reduce their monthly mortgage payment.

The first and HELOC second had previously been in forbearance, along with another rental property that they owned. Forbearance is when the mortgage servicer or lender allows the resident to pause or reduce mortgage payments for a limited time.

For conventional lending, in order to refinance, all of the properties are required to have completed the forbearance and show three timely mortgage payments since the completion date of the forbearance.

Additionally, an exit letter for each property stipulating that the forbearance was successfully completed is required before a new loan can be opened.

Three months of timely payment is a requirement for conventional lending, whereas in Jumbo lending the standard requirement for timely payment is even longer (six to 12 timely payments from completion).

Fortunately, with the conventional loan limits increasing in 2022, we were able to qualify for the loan amount of $1.243 million, which is the loan limit for a duplex.

Obtaining the “exit letter” from the current lender was no easy feat, but my clients persisted and eventually succeeded in obtaining what we needed to close their new loan.

My clients lowered their mortgage payment by $1,185 per month, which translated to an annual savings of over $14,000 per year. Additionally, they now have peace of mind that their rate won’t change, particularly in light of the Federal Reserve’s plan to raise rates several times in 2022, which will directly impact the Home Equity Line rate.