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New FHA Hybrid Loan - Refinance with NO FEES?

My sister is in the process of refinancing, the offer they have received from Peoples Bank in Alabama has this claim for an FHA Hybrid Loan:
- no fees
- no appraisals
- roll over current balance/no cash out
- begins with a very low rate that will only go lower on the 4th year and begin to climb 1% around 5th or 6th year but with a cap that will protect them...
- when I asked how Peoples Bank would benefit in all this, she said they were told the govt is doing this for people due to the economy and it is completely at no cost to her and her husband.  The bank receives their incentive from FHA and it is backed by the US Treasury;  banks are paid by the govt to offer these loans to stop the current foreclosure frenzy.
She sent me a copy of the offer with all of the bells and whistles printed all over it. I'm not sure if I can attach, BUT, if this is true why wouldn't all of us be better off refinancing with this "new" - no cost to me, offer from our friendly US Govt. 
She was told that even with the worst case scenario where interest rates are concerned her payments will never go above what she is paying now.
Is this real?
  • September 23 2011 - Phenix City
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Answers (10)

Best Answer

Yes, we have heard of those loans since we all have the same loans. This is nothing special, every FHA lender on Zillow can offer the exact same thing, just a bad idea to take a 3/1 Arm when rates are the lowest in 60 plus years. As far as no fees goes, it is a 99.9% probability that the interest was raised slightly to pay a lender credit, again nothing different than any other lender can offer. If you want to forward that offer to me in email, I am happy to give you feedback on it. Just curious, what rate are they quoting and does it read 3/1?     
  • September 23 2011
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You can get the same deal with a FHA  5/1 ARM. Is anyone even naive enough to take a 3/1 anymore?

As for "only go lower" the 4th year; that's very misleading and enough reason to high tail it away from that lender for hoisting such nonsense.

It may go lower, it may stay the same, or it may go higher in the 4th year...and so forth.
  • September 24 2011
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These are called Streamline refinance loans and have been around for years. The VA also has a simular loan called an interest rate reduction loan or IRRL. It sounds like the B of A was selling this borrower a line of BS
  • September 23 2011
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@Clay, great answer.  What I am confused about is that HUD has came out with specific requirements to NOT market for loans using any semblence of "backed by the US Treasury"  (trying to convince the public that the offer is directly from HUD in any way, shape or form).  This marketing piece would not make it pass my compliance officer at all.  More evidence consumers are better off dealing with mortgage bankers/brokers who are NMLS licensed.
  • September 23 2011
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Profile picture for shapiroamg
when I asked how Peoples Bank would benefit in all this, she said they were told the govt is doing this for people due to the economy and it is completely at no cost to her and her husband. The bank receives their incentive from FHA and it is backed by the US Treasury; banks are paid by the govt to offer these loans to stop the current foreclosure frenzy.
She sent me a copy of the offer with all of the bells and whistles printed all over it. I'm not sure if I can attach, BUT, if this is true why wouldn't all of us be better off refinancing with this "new" - no cost to me, offer from our friendly US Govt. 

---------------------------------

What an amazing marketing spin on this. Who baby based on the claims above I might be able to say I'm the secondary market manager for FannieMae as I add the best loans possible to the next security to be sold to the Chinese.
  • September 23 2011
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Profile picture for curious deb
just emailed it to you clay.. thanks again.
  • September 23 2011
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Profile picture for curious deb
Cant seem to figure out how to edit rather than add a reply...

Ok, I read the responses to her, thank you.  Has anyone heard of such a loan...?  And Clay it does say streamline on the paper she sent me.  She is going to ask about the MI which I brought up to them before.  He said they will not add ANY fees but she is going to specifically ask this question when she gets a chance. They have already started the process and I couldn't find solid evidence on-line disproving Peoples claims to stop her and her husband from going forward. At this point I am trying to educate myself on the subject.
Thanks Clay and shapiroamg
  • September 23 2011
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Sounds like a streamline using a 3/1 arm, bad idea and nothing different from what any FHA approved lender can offer. DO NOT TAKE A 3/1 ARM. The monthly MI payment will probably be much higher than the existing MI payment. 
  • September 23 2011
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I need to speak to the Mortgage Geanie about this one...
  • September 23 2011
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Profile picture for curious deb
Need to correct an error. Peoples Bank is not in Alabama where my sisters home is, they are in Ohio.
And includes,
-no clasing cost
  • September 23 2011
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