10-06-2012 09:30 AM
Hoping a mortgage expert can help with some advice. I'm in the middle of an FHA Streamline Refi in Columbus, OH. Spoke with a local loan officer this past Monday, went thru the details of my current FHA loan at 4.75, and he said he could get me refinanced at 3.25 with lender credit of 2%, which was $5119. He said this would cover my closing costs and escrow deposit. He also made note that I would receive a refund from BofA of my current escrow account after closing and my first paymetn would be December 1st. He put all this in a statement with the application he emailed me:
"I am giving you a lender credit of $5119 to cover closing costs and escrow. Right now it has you bringing about $917 to closing which we are shooting for Oct 25 and you will not have a payment until December. You are also going to get a check for the balance of your current escrow back within 15 days of closing from Bk of America. Once you send your docs back and we register the loan with FHA Connections we will also be able to get the prorated MIP which right now is being calculated at 1.75%, but FHA will prorate that over the time you have been paying on the current loan."
The initial GFE and application prepaids details had my escrow deposit at $3660. My current BofA escrow balance on 10/1 was $2890. My taxes are $3258 paid twice a year in January and June, and my hazard insurance is $289 paid in April (it's a condo), and the MIP is $248. No other escrow requirements.
I completed the loan application with all required documentation they requested. I received a message from loan officer yesterday saying that my loan was approved and to sign and retuen the new disclosures. I review the updated GFE and details of the loan application, and was shocked to see that my escrow deposit had been reduced to $1134 from $3660 and a reduction of the lender credit to $3471 from $5119. So they basically decided to only provide escrow for 2 months of taxes and insurance with no MIP, and then use the FHA Streamline rules to say they must lower the lender credit because it would exceed the closing costs and prepaidsThis means my escrow account with the new lender will be short when the first half of my taxes are due January 1st, and then I will have to make up the difference with a large deposit or higher escrow until it balances. This seems like a bait and switch to me, since the loan officer was selling the loan with 2% credit covering closing and escrow, and specifically pointing out that I would get my curret escrow account refund back.
I have not signed the new disclosure and sent a message back asking about the siginificant change in my escrow funding and the lender credit he agreed to. Have not heard anything back, but it's the weekend. I have been scouring google and this board about calculating the initial escrow and the HUD regulation. It's not very specific and seems lenders have a lot of latitude in determining the initial deposit. What I generally understand is that they can require a max of 2 months reserves plus up to 1/6 of the annual reserves. I was a little unclear if it was both or if the 1/6 was the same as the 2 mos.? I also found that if the tax payment was within 60 days of closing, then the lender could require up tp almost the full year reserves. All of these are to protect me from having to put too much in, but that's not my concern here.
While it still seems like a good deal, it seems like I'm getting worked so they can make more money by lowering their original lender credit amount. Has anyone else had a similar experience or advice to either call them on it or ease my mind.
Thanks for any help or advice.