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I think I don't quite get how the mortgage system works in the USA. In Australia it is fairly easy to go to a competing bank or other financial institution if y

by Evgeny 16y ago

I think I don't quite get how the mortgage system works in the USA. In Australia it is fairly easy to go to a competing bank or other financial institution if you're unhappy with you current lender, discuss the terms and maybe get a better deal, get a loan from the new lender and pay out the outstanding loan with the previous lender. You may have to pay some fee for paying out your mortgage too early, but it's usually not that huge. Is this not possible in the USA?

jrwoodruff 16y ago
Usually possible, but fairly expensive. Mortgages, at least here, are generally not terribly simple... Loan origination fees, inspections, in addition to possible early payment fees... usually several thousand dollars, depending on the size of the loan. Also, many homeowners over here (probably including the guy in this article) are underwater; that is, they owe more on their home than it's worth, making it pretty much impossible to refinance.
- caf 16y ago
  Is it really likely that he is underwater on a loan that he's been repaying for seven years? Have valuations dropped that far?
  - waterlesscloud 16y ago
    They certainly have in parts of California.
brc 16y ago
Yes it is possible, and it is just as easy. It works in much the same way - there are differences between the two countries - but the option of refinancing your loan is pretty much the same. In both instances you'll be up for fees for breaking your old loan, and up for fees for originating your new loan. What's more likely is that due to changed circumstances this guy wouldn't qualify for his loan again. So while a bank can't force you to leave because your credit situation has deterioated, you are effectively locked in because another bank wouldn't want you. The same can happen in Australia (and will probably be happening in increasing amounts in the coming years). I have built software for American mortgage lenders and Australian mortgage lenders (and UK ones, for that matter). The three countries have very similar systems, although the USA has a much wider variety of product options, the laws around originating and terminating loans are pretty similar. This is not surprising, all three countries have laws evolved from the same system, and mortgages are a very old legal construct. A deteriation in his credit might be : loss of job, reduction in income, another loan default (say, car loan or credit card) or the value of his house being less than the mortgage (most likely I would guess). In effect he just wants the mysterious charges removed so he can manage his budget. As long as you're paying your mortgage the bank can't touch you. In reality Wells Fargo are probably trying to get him to leave of his own accord.

by Evgeny 16y ago

jrwoodruff 16y ago

Usually possible, but fairly expensive. Mortgages, at least here, are generally not terribly simple... Loan origination fees, inspections, in addition to possible early payment fees... usually several thousand dollars, depending on the size of the loan. Also, many homeowners over here (probably including the guy in this article) are underwater; that is, they owe more on their home than it's worth, making it pretty much impossible to refinance.

caf 16y ago
Is it really likely that he is underwater on a loan that he's been repaying for seven years? Have valuations dropped that far?
- waterlesscloud 16y ago
  They certainly have in parts of California.

brc 16y ago

Yes it is possible, and it is just as easy. It works in much the same way - there are differences between the two countries - but the option of refinancing your loan is pretty much the same. In both instances you'll be up for fees for breaking your old loan, and up for fees for originating your new loan. What's more likely is that due to changed circumstances this guy wouldn't qualify for his loan again. So while a bank can't force you to leave because your credit situation has deterioated, you are effectively locked in because another bank wouldn't want you. The same can happen in Australia (and will probably be happening in increasing amounts in the coming years). I have built software for American mortgage lenders and Australian mortgage lenders (and UK ones, for that matter). The three countries have very similar systems, although the USA has a much wider variety of product options, the laws around originating and terminating loans are pretty similar. This is not surprising, all three countries have laws evolved from the same system, and mortgages are a very old legal construct. A deteriation in his credit might be : loss of job, reduction in income, another loan default (say, car loan or credit card) or the value of his house being less than the mortgage (most likely I would guess). In effect he just wants the mysterious charges removed so he can manage his budget. As long as you're paying your mortgage the bank can't touch you. In reality Wells Fargo are probably trying to get him to leave of his own accord.