HARP 2.0 – Part 2: Finding a lender

So you’ve read part 1 and figured out that you’re qualified for the HARP 2.0 program. Good, now comes the more difficult part of the process, finding a lender that will refinance you. This can be easy or difficult depending on how underwater you are on your house, and whether or not your current mortgage servicer offers refinancing programs. I was in the difficult position of having two strikes against me – my current mortgage servicer does not lend (they’re strictly a mortgage servicer) so I had to find a different lender and my Loan-to-Value (LTV) ratio was above 125%. The only thing that could have made that worse would be if I paid PMI when I bought the house or if I had a second mortgage (neither of which were a problem for me).

Your Existing Lender

If your current mortgage servicer offers programs to refinance your loan, this process will go much smoother. You aren’t required to refinance with them, but it is a good place to start looking and comparing rates. If your LTV is below 125% then it’ll be easy to shop around, but if its above 125% you might be stuck with your current servicer with only a few other options to check out.

A Different Lender

If your current mortgage doesn’t offer programs to refinance (like mine) you’re stuck having to find a new company to refinance with. This becomes especially difficult if your LTV ratio is above 125% as many lenders aren’t refinancing Fannie Mae and Freddie Mac backed loans above 125% even though March 15th has passed and the new software (Desktop Underwriter or DU Refi Plus) has been rolled out to everyone.

Also in my case and the case for those refinancing at above 125% LTV, only one loan program through Fannie Mae is currently being offered – 30 year fixed rate. No other programs (20, 15 year) are currently being offered for those above 125% LTV. They may be rolled out in the next few months (June 1st was a date I had heard but I don’t know if thats accurate).

In my experience, I had tried the major banks and none of them were accepting customers from other loan servicers with LTV ratios above 125%. Even major online mortgage companies were capped at 125% for the time being. I had to contact about 12 banks before I was able to find two that would refinance me in my current situation. (names intentionally omitted until I’m done with the process)

Getting Multiple Quotes

Finding multiple lenders is important, as you can play them off each other to get a better rate. When I had first got my house, I had two rate quotes, and one lender was able to match the other’s lower rate and pay for part of the closing costs, instead of just having the lowest rate.

Moving Forward

The last step is getting all the documents from both the lender and that you’ll need to complete the underwriting process.

Thats it for part two. As I move through the process I’ll post the third (and presumably final) part when my loan closes and I get a final figure for how much my payment will go down a month, and what I have to do to amortize at the same rate as my current loan.

GM shutting down Volt production for 5 weeks…

It was annouced last Friday that GM would be shutting down production on the Chevy Volt for five weeks starting in mid-March until mid-to-late April. The stated reason was that there was too much channel inventory, about twice as much as a normal car.

There are a few problems with that outlook, in that the Volt isn’t a normal car. Its a specialized low-volume (for now) car. If a GM dealer only sells about 1 car for every 3 dealerships per month (3,000 dealerships, 1,000 cars a month), that would mean a dealership would either have zero or one Volts on their lot when the customer shows up to look at them. Not very pleasing from a customer point of view, “well this is the only one we have, and we wont get another one for 2 months, and all the other dealers in town only have one each too!” If you want the customer to have a reasonable choice of configurations, you’ll need about 3-4 cars per dealership, varied in color and configuration throughout the city. My local market has about 15 Volts (including 4 models that were originally demo units) for sale, some of which are still in transit to the dealer. My rough approximation is about 10 cars per million people in a metro area. So where I live should have about 20 cars for sale. This is also roughly a 4 months inventory. The problem with 4 months of inventory is what are you going to do when the new models come out in August or September? Take huge losses on 1/3 of your annual inventory? Not likely.

So what I’m expecting is that GM is trying to push down inventory to about 5 cars per million people so that when it comes time for the 2013 models to show up, dealers aren’t stuck with four or five really slow selling cars.

I’m somewhat optimistic that such an aggressive early push is hinting at some bigger, better things to come in 2013. By then, GM should be producing both the engine and battery cells domestically (Austria and S. Korea, respectively). GM has stated that the cost of freight for the battery cells is non-trivial, possibly in the range of $100-200/kWh. This would translate to a $1600-3200 cost per vehicle when the freight costs are factored in. Combined with the engine’s reduced freight costs as well, a $2,000-4,000 price cut could be in store for 2013, necessitating even deeper cuts in the 2012 Volt price to move them off the lot. Plus, the idea of a $29,950 price tag after rebate seems really appealing from a marketing standpoint — after tax credit it would be cheaper than the plug-in Prius, and the same price as the high end Prius, and all the comparisons with a loaded Civic start to look better.

EDIT: On April 8, GM announced that in the wake of record sales in March 2012 (including the one Volt I bought!) the plant will open one week early, on April 16 instead of April 23.