Bloomberg Radio
"The Money Show"
February 10, 2003

"Should You Refinance Again?"
with guest, Michael Moskowitz,
President of Equity Now, Direct Mortgage Lender

MODERATOR: Have you refinanced once already and then thought about refinancing again? When is that a good idea? We're going to have Michael Moskowitz of Equity Now with us to answer your questions at 1-800-971-1130. Tell me a little bit more about Equity Now, tell me about the customers that you cater to.

MM: We've been in business since 1984. We cater mostly to people with difficult financial situations or imperfect credit. And larger loans.

MODERATOR: Give me a reason why people would have waited this long to refinance. Isn't anybody who's going to refinance already doing it?

MM: You'd be surprised how many people are simply busy with their everyday life and hardly have enough time to catch up with yesterday's list of things to do. Refinancing just slips away and they're paying 8, 9 percent and, you know - we have clients that we have to remind sometimes that they're paying 8-1/2 percent and they can get 6 or 6-1/2 or 5-3/4 and they're just busy.

MODERATOR: As far as refinancing now if you've just financed or refinanced let's say a year ago because the rates were so low, is that difficult to do? Or is it wise to do?

MM: I think whatever was done in the past, the way you approach a refinancing is you look at the things at hand. If you're paying 6-1/2 percent and you can go to 5-1/2 percent and you have a $400,000 loan, so you're saving 4,000 a year. If it costs you 3,000, you should do it.

MODERATOR: Is there anyone out there who should not be refinancing?

MM: I think somebody who is going to move soon enough - if you can't cover your costs in the time that you expect to move, you shouldn't refinance. Many people unfortunately can't refinance. They've had good credit in the past and now they have bad credit, they can't refinance because of bad credit. That's all I could think of.

MODERATOR: I'm curious as to how long it takes to get a mortgage or a refinancing turned around for a potential customer. The reason I ask is that lately I've been out applying for mortgages, bought a new place and was on the phone waiting to talk to a human being and there was a recorded message saying basically brace yourself for delays, things are so busy with all of the refinancing, your closing date might even get pushed out just because things are so busy. Is that what you're experiencing, it that the case for your customers?

MM: Charlie, you want to talk to a human being? Call me.

MODERATOR: But are things really that busy for you right now?

MM: We are a small company. We're about 25, 30 professionals in our company. But we're in one place, we're not branches, it's all in one location. If you come in to me on a Monday and your property's in the five boroughs or Long Island or close by in Jersey, I can lend you the money on Friday. So we're just better equipped, we have relationships with our appraisers, we're not this big humongous company that has a system that appraisals get done in two, three weeks. We're just blessed that way. Sometimes we get the business even though we may be a little bit more expensive, out of convenience. People will pay another $500 to get it done on time. I mean, we're very busy but we can always use more business.

MODERATOR: Let's go to the phones. Tony from Levittown, New York. You're on the Bloomberg Money Show.

TONY: We just bought a home within the last year and we want to refinance. Is it best to go through our existing bank or go through a broker? You know, basically what we're trying to do is save on the fees and if we could just get 'em to recalculate it for like the point and a half less than the mortgage is, I mean, that would be like the best way for us to do it.

MM: Tell me who your bank is and what rate are you paying, how big your mortgage is.

TONY: It's a $250,000 mortgage, the bank is Homesite, which I understand was just bought out by Washington Mutual, and the rate is 7-1/4 that we're paying now. The negotiations, we have one that wants to lock us in at 5-3/4 with no points.

MM: You should be able to get the same rate from your current bank. You are in New York State, so even though you're on Long Island, you have a mortgage recording tax of three-quarters of one percent. What you should do is call Washington Mutual Homesite and ask them for a modification. You might want to write that down. You want to refinance a modification, which is basically a one-page or two-page document. You pay 'em a 2, 3, 4, $500 legal fee and you just modify your rate. Everything stays the same. That's the way for you to go. Now, if they don't do that, you still want to refinance with them because you won't have to pay mortgage tax again. In the case of Washington Mutual, you just want to go to their Web site.

TONY: It's easier to go right through their Web site instead of using like a broker who would -

MM: Well, I don't have much love lost for brokers. So I would say if you can handle it yourself, it's no big deal. Talk to a human being, to a person, to see if they do modifications. Send some e-mails. But the way for you to go is modification, you'll save a lot of money. If not, refinance with the same bank. Is this full income check? ?

TONY: Yes.

MM: Okay, it should be easy to you to do yourself.

MODERATOR: Good luck, Tony. Thank you very much. Michael, the crazy things that big banks do to drive away potential customers and existing customers never ceases to amaze me. But it would seem to me that this guy's bank - whether it's Washington Mutual or Homesite - this guy's bank has every incentive to hold on to him as a customer and to do everything it can to keep that relationship even at a lower mortgage rate.

MM: I agree with you. But sometimes, many times, most of the times, the loans have been sold to securities - to Freddie Mae, Freddie Mac securities - and they're just servicing it for them and they really don't have final say in it. The security document is what governs.

MODERATOR: Understood. So he thinks he may be dealing with Washington Mutual when in reality, the mortgage has gone beyond that particular bank.

MM: Right.

MODERATOR: There's no way, I take it, to prevent that from happening. So you're with one bank and you could be transferred any number of times.

MM: You can be transferred any number of times. But your terms cannot be modified.

MODERATOR: And do they notify when your mortgage is transferred to another bank?

MM: They have to notify you. In practical terms it's usually 15 days in advance.

MODERATOR: Joe in Plainview, you're on the Bloomberg Money Show.

JOE: I just refinanced my mortgage. I had 19 years left on a 30-year mortgage at 8 percent. I refinanced with the same mortgage company, GMAC. I dropped it down to a 15-year mortgage. It wound up costing me about $3,700 for closing costs.

MM: How big is your mortgage outstanding? How much do you owe to GMAC?

JOE: The mortgage was 141,000. And with the closing costs rolled into it, the mortgage came out to about 144 and change.

MM: And what's the new rate that you got on the 15-year?

JOE: Five and three-quarters.

MM: Joe, let me explain to you something. At closing - what day did you close?

JOE: The date was February 6th.

MM: Okay. I hate to tell you this, but you should have gotten more like 5-1/4, 5-3/8 as opposed to 5-3/4. That's just where the market is.

MM: Now, I don't know your particular situation. Maybe your credit isn't so perfect.

JOE: No, my credit is perfect.

MM: Okay. On a 15-year fixed, you should have gotten no points, 5-1/4, 5-3/8. I'm just telling you the truth.

JOE: I understand. But you don't think it was worth it for me to go from an 8 to 5-3/4 and drop four years off my mortgage?

MM: Can you afford the new payments?

JOE: It's costing me $31 more.

MM: Okay. Fine. But I think it would be more worth it for you to go to 51/4, 5-3/8 as opposed to 53/4. I think they charged you more than they should charge a customer. It's just my personal feeling. I think you did very well, but I think the market is lower.

JOE: It took a long time because the mortgage wasn't, I guess it's registered with Nassau County. My old mortgage, they just kept selling it and selling it so the title search was a real pain. By the time they got everything done, this thing all happened in November, I didn't wind up closing until February.

MM: I understand. Maybe in a case like that, you should ask to talk to a manager. But when you're refinancing with your current company, you should always try to check somebody else out, see what the market is.

MODERATOR: Thank you for the phone call sir, much appreciate it. More of your phone calls coming up. Let's go now to Lynne in New York, New York, as we continue on the Bloomberg Money Show. Hi, Lynne, welcome. You're on the Bloomberg Money Show.

LYNNE: I have an apartment, it was a public co-op that reconstituted and became private. I'm told it's worth $350,000. I currently have no mortgage on it. People tell me that in the current environment, I'm wise to take out a mortgage. What do you think?

MM: Lynne, the feeling I'm getting is that you're really not a big Wall Street trader or mover and shaker. People are trying to say to you hey, use the money and invest it.

LYNNE: Right. Yes. To get something with a dividend which would then be tax-free.

MM: What I'm saying to you is that you can take out $250,000 and lose it also. You don't want to be in that position. Do you work, are you retired?

LYNNE: I recently retired. I have a defined pension.

MM: Do you have enough money coming in every month where you live comfortably?

LYNNE: Yes. I'm debt-free and I have savings.

MM: If I were you, and I happen to be a CPA by training, I wouldn't touch that money. The only people who are trying to talk you into borrowing money are the people who are going to make money on borrowing the mortgage and the people who are going to make money on investing into some stocks. It sounds to me like you're better off living debt-free with the peace of mind.

MODERATOR: Thank you, Lynne. Let's go to Don in Huntington. Don, you're on the Bloomberg Money Show.

DON: I'm buying a house and applying for a mortgage, selling two homes and I'm being told that getting a bridge loan if the closing dates don't line up, there's no problem. But looking at the statistics, very few of those seem to be offered. I wondered if I have reason to be concerned about being able to really get a bridge loan.

MM: Who told you it's not a problem, the real estate broker?

DON: Exactly, the real estate broker.

MM: Of course. As long as you sign on the dotted line, there's no problem. You're selling one home or two homes?

DON: I'm selling two homes and they're in the process of being sold but I'm not confident that the closing dates are going to really line up in the best way for us.

MM: Bridge loans are usually available for more like private banking type of situations. They're usually expensive and if you can avoid it, you always want to avoid it.

DON: Okay. So just really do our best to get the houses sold and get out.

MM: Do your best. If I was you, I'd let a thousand or two go to close on time and not look for a bridge loan because it's a hassle and it's expensive. Don, do you want to tell us your numbers so we can run them?

DON: Sure. I'm applying for a mortgage well within my means. The mortgage is going to be about 320. If I have to, get a jumbo 340. I'm going to need the money maybe for a week.

MM: Don, how much is the house you're buying?

DON: The house is 720. I'm recently married and we owe together 330 on our house.

MM: The bottom line is you have a few choices. You can take a 320 first on the house that you're buying instead of taking a bridge on the old house. You can get a second on the new purchase. That's a much better way to go because that's easier to do. So you get a first for 320, you get a 300 second, I'm sure you can get that. And get an adjustable and pay it off. That's a better way to get a bridge on the old houses.

DON: That's very creative. Thank you.

MODERATOR: Thank you, Don. Let's continue with our next caller in Berkeley Heights. Patrick, welcome. You're on the Bloomberg Money Show.

PATRICK: I'd like to find out how lock-in rates work and how long do they last. Do you have to pay a fee for your lock-in rate?

MM: Are you dealing with a broker or a lender?

PATRICK: Through a mortgage broker.

MM: Okay. Through a mortgage broker, you have to be very, very careful because you want the agreement of lock-in with the lender because the broker has no ability, has no legal right to lend you money. So you want your agreement talking about rate lock to be executed between you and the lender.

PATRICK: Is that something that you would have to pay for?

MM: That's negotiable. In the past, it used to be you pay a point to lock in a rate. But it's more expensive to lock in a rate than to float a rate because you're locking in a guaranteed rate. What's your situation?

PATRICK: We refinanced about a year ago from a house

MM: How big is the loan?

PATRICK: Right now, about 220,000.

MM: What rate are they giving you?

PATRICK: Right now, we're at 6-7/8.

MM: What are they offering you?

PATRICK: Well, this is what we did two years ago. We refinanced from 8 down to 6 and we were supposed to get 6 1/2 and our lock-in expired because someone lost the paperwork.

MM: You should complain to the banking department. If you feel you're not being treated fairly, complain to the New York State Banking Department. They're downtown. Ask to speak to the owner or the manager of the company.

PATRICK: How about in New Jersey?

MM: In New Jersey, there's a banking department in Jersey and if you feel that there's shenanigans going on, they're going on.

MODERATOR: Patrick, how does paperwork get lost? I mean, I know the answer to the question but I guess I'm just asking because it just frustrates me when I hear stories like this - where a guy like you sounds like you've done all the right things and paperwork winds up getting lost.

MM: Charlie, can I explain it to you? The rates went up and they didn't want to lower the rates so the paperwork got lost.

MODERATOR: That's the answer I suspected, but I was just asking the question just in case. I thought maybe there was a reasonable explanation. All right. Thank you so much, Patrick, for that phone call. Let's go to Mark in Nutley, New Jersey. Mark, welcome. You're on the Bloomberg Money Show.

MARK: I have a situation. I got a loan on a property in 1996 at 7 1/2 percent, it was $320,000. There's about 250,000 left. It's Maspeth Federal Savings Bank. They still own the loan in their portfolio, they service it. I went, I talked to the head guy there and he said they can modify it except he wants to charge me besides a $500 legal fee, $2,500 for the privilege of modifying it. So it would end up costing me $3,000 and he would only go to 6 1/4. The reason I don't go elsewhere is because I don't want to go through the whole recertification, all the paperwork, and I have now about eight years left. I'm paying mainly principal, if you follow what I'm talking about.

MM: Tell me again, how much do you owe and what rate is it at?

MARK: It's at 7 1/2 and it's about now less than 250, about 240. Every month it goes down precipitously because I pay about $2,900 a month.

MM: Okay. I'd love to address that issue briefly. Borrowers think that they're paying interest only. It doesn't matter, you owe $250,000. You can refinance into a 10-year loan. You can refinance into a 7-year adjustable at probably much - what you should look into, Mark, you have nine years left?

MARK: Roughly, yes.

MM: Here's an idea. Look into a 7-year adjustable, which you're probably going to be able to get at like high fours. Then don't worry about the other two years. Whatever will happen will happen. You see what I'm saying?

MARK: All right. Maybe I'll give you a call and we'll work something out.

MODERATOR: All right. Thank you so much for that phone call. ?I'm glad you're with us. Michael Moskowitz is our guest, he's the president of Equity Now. We are discussing mortgage refinancings. We'd love to hear from you. Let's go out to Great Neck on the Island and Adam from Great Neck. Welcome, you're on the Bloomberg Money Show.

ADAM: I had a 30-year mortgage, I'm only three years into it, it was a 7 percent jumbo. My question is, they offered me to refinance, not refinance but like renegotiate the rate and they want to charge me $1,250, same bank and continue on with the loan at 6 1/4 percent. I want to know if that's a good rate and should I take it.

MM: I'd take it.

ADAM: Okay. So a jumbo at 6-1/4 is good?

MM: It's good. Maybe you can get 6-1/8 but it's only $1,250. Yeah, that sounds like a fair enough deal.

MODERATOR: Thank you. Peter from Manhattan, you're on the Bloomberg Money Show.

PETER: My question is this. Not in terms of my own finances, but in terms of the economy and that at some point in the future, there'll be higher interest rates and inflation. Do you put your money to work better in a 30-year loan than in a 15-year loan, even though you might pay a half a percent more for the 30-year loan?

MM: A 30-year loan usually is [3/8 higher], sometimes a quarter. The way I look at it, I advise most people to consider not taking a 15-year and taking a 30-year because if you have money sitting around, you can always make bigger payments and pay it off sooner. But if you can't afford it, if you have hardships, you're not tied in to making a 15-year payment. Now, I personally would borrow 30 years and put the money to better use in other investments. And of course, it depends what investments you have.

PETER: May I ask a second question? What I'm refinancing is a farm in Massachusetts and I'm having a lot of trouble because there's acreage involved. Do you know anything about Fannie Mae not buying mortgages that involve acreage?

MM: Yes, of course. I think you're usually best off going to a local bank who's familiar with the market.

MODERATOR: Peter, thank you very much for the phone call. Michael Moskowitz, thanks so much for being on the Bloomberg Money Show. The name of your company is Equity Now. You'd like to give out a Web site?

MM: Of course. Equitynow.com.

MODERATOR: Very easy. Thanks so much for being on the Bloomberg Money Show