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Posted On: 04/11/2012

QUESTION:

I have found a lender who makes 7/1 and 5/1 ARMs but does not make fixed-rate loans. They say they have no link to Fannie Mae or Freddie Mac and set rates as they want. How is this possible?

ANSWER:

Lenders are not obligated to offer every type and variety of mortgage, nor are they required to charge a given rate, resell their loans to Fannie Mae or Freddie Mac or even accept federal bailout money.

An interesting example concerns Hudson City Bancorp, a well-regarded lender that in 2008 rejected federal funds. It said at the time that “Hudson City's business model has always been to provide first-mortgage loans on residential properties to qualified borrowers who have equity in the property. We have never offered sub-prime mortgages, negative amortization loans, payment option loans or other risky mortgage products. We do not sell any of our loan production to the secondary market. We keep all of our loans in portfolio. As a result, we have not been seriously affected by conditions in the marketplace.”

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As a borrower the important question is which lender can deliver the financing that best meets your needs, including all rates, terms and conditions. Shop around and stick to the basic issues that impact your finances.

QUESTION:

My uncle refinanced from an FHA loan to a conventional mortgage. The FHA loan was two years old, and he paid a lot for the up-front mortgage insurance premium. Can he get back any of that insurance money?

ANSWER:

The FHA was established in the 1930s and designed to be a “mutual” insurance plan where borrowers essentially were the program shareholders and refunds would be available when claims were low. That’s no longer the case. As HUD explains, FHA refunds have been eliminated for loans made after Dec. 8, 2004 "except when the borrower refinances to another mortgage to be insured by FHA." Speak with lenders for details.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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