I received yet another one of their sly letters and was compelled to write this rip off report. I'm a former mortgage professional so I have some insight into how this works. Like me, many others might get a perforated trifolded letter like one that might have come from a government agency. It has a stamp on it showing "postage paid" that even has an eagle stamped on it again, giving one the impression that it's something urgent from The State. The front reads "Request for Immediate Action: Time Sensitive Material Enclosed" in all caps. Then it reads "$2000 fine, 5 year imprisonment or both for any person interfering or obstructing with delivery of this letter."
Apparently, the Residential Finance Corporation hopes to get my and others' attention by putting this rubbish on the envelope. What's inside isn't much better. When you open the envelope you find a "prequalification" offer. These letters are triggered when you apply for a mortgage with someone and the pull what's called a "trimerge" credit report. Residential Finance uses public record information to "personalize" your prequalification letter by showing your last recorded mortgage amount and quoting a new interest rate and payment.
What they don't tell you is that this prequalification letter has absolutely ZERO basis and they basically just want you to call their 800 number. This is a lead-generating marketing technique.
They don't know what your house is worth, and loan-to-value is one of the MAIN determinants of whether you can get a loan at all. For example, my present loan is 95% of the present value of my home. I won't qualify for the FHA loan they are pitching me even if I paid the absurd closing costs (in the fine print they say their rate is based on one origination point and one discount point—not to mention any of the other closing costs) This in my case would mean at least $4678 FHA funding fee of at least 1.5% (I think it's more now).
Buyers beware: when you see mortgage rates advertised, there are certain assumptions like, for instance, that you have 20% equity in your house and that you meet income requirements. These guys are hinting in their offer that they can do a cash-out refinance at 4.5% which is totally absurd (they make mention that I can even consolidate some credit card debt).
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