How it Works
What you need to know about the Underwater Refi:
What is it?
The Underwater Refi is a “lifeline” for underwater homeowners! It gets rid of your underwater loan and gets you a new loan at 90% of your home’s current market value. If your loan is at least 25% higher than your home’s current market value, you may be eligible for an Underwater Refi!
The Underwater Refi is NOT a loan modification or short sale. It is a Principal Reduction Refinance. Qualification is based on income, not credit score and you do not have to sell your home.
This program is possible only because RescueRefi.com has partnered with a a large private Hedge Fund who purchases your loan directly from your lender. Then, because they now own your loan, they can give you a new loan. Because the Hedge Fund is private, they are able to make their own lending decisions and are not constrained by typical bank lending guidelines.
The Hedge Fund professionals will negotiate with your lender(s) to purchase your loan at no more than 90% of current market value. They will then give you a new loan with a principal balance equal to 90% of current market value. You qualify for the new mortgage based on your income and employment, not on your credit score. So if you’ve missed mortgage payments, we can still work with you.
The Underwater Refi takes longer than a typical refinance and not everyone will qualify. Also, it is not a solution if your are in imminent danger of losing your home to foreclosure. If your are current on payments or have missed payments but not gone into foreclosure we may be able to help you.
Who Qualifies?
RescueRefi.com is proud to announce that many underwater homeowners already qualify for this program.
This program is not just for homeowners who are behind. As a matter of fact homeowners who have not been behind on their mortgage payments but are significantly upside down may be given interest rates as low as 5-6% through the principal reduction program.
Underwater Refi Program Requirements
- Your home must be “upside down” by at least 25% (your loan balance must be at least 25% greater than the current market value of your home). Use the Homeowner Pre-qualification Worksheet provided on the Getting Started or Downloads page to see whether you meet this criteria
- The maximum allowable “back end” debt-to-income ratio (DTI) for the new loan is 50%. Add your monthly principal, interest, property tax and insurance plus all debt payments such as car loans, credit cards, student loans, etc. Divide this amount by gross monthly income. Use the same worksheet mentioned above to see whether you meet this criteria
- You must be able to document your income
Steps in an Underwater Refi
- First, make sure you qualify for the Underwater Refi. See the section above for the Program Requirements. No matter what happens on your initial calculation, make sure you contact us to review your results to make sure everything is in order.
- Contact us for your Free Consultation to review the results of your initial Pre-qualification and determine what the next appropriate steps are
- Once we mutually decide that the Undewater Refi is for you, you’ll submit a full and complete documentation package, signed service contract and payment to RescueRefi.com. See the “Getting Started” page for more information
- We review the file to make sure that all necessary documentation is in place and that we are confident an Underwater Refi will be successful
- We submit your loan package to our Hedge Fund Professionals who pool your loan with others from the same lender. This way we get bargaining power and a better purchase price (however, we do not wait long to approach the lender. If your loan is the only one we currently have from that lender then we’ll approach them within a week or so of receiving the file).
- We negotiate with the lender to purchase your loan and the others in the pool. Once the loan is purchased, we order a full interior/exterior appraisal. This will be used to set the final amount of your new loan
- When the appraisal value is received, we calculate the new interest rate and payment and prepare your loan documentation.
- The new loan documents are delivered to the local office of a large, nationwide escrow company for you to sign.
At this point, your Underwater Refi is complete!
Underwater Refi Costs
The Underwater Refi has an up front cost of $1,595.00. This covers the expenses incurred during the process including file submission, processing, appraisal and all closing costs including escrow, title doc prep, recording, etc. Nearly all of the cost is used to pay third-party service providers (appraisal, title, escrow, etc.) There are no loan-related fees paid by the client at closing. The client is only responsible for recurring costs such as property tax and insurance premiums that are due.
At this time there is no refund policy. Services are considered rendered at the time of submission. However, we are examining this and may change this policy in the near future.
Required Documentation
Documentation requirements are similar to those from a bank lender:
- Two most recent paystubs and W-2 forms. Twelve months bank statements can be used as substitute only if self employed
- Rental income with rental agreement (if applicable)
- Documentation for any other type of income
- Three months bank statements from all asset accounts (to show reserves). Twelve months if self-employed and not using check stubs
- Credit report (we will run that for you)
- Original note(s)
- Most recent mortgage statement(s)
- Hazard insurance declaration page
- Property tax statement
- Homeowners association statement (if applicable)
- Documentation for any other liens or judgments
- Hardship letter – why you are behind on payments (if applicable)
- Authorization to release information (so we can contact your lenders)
- Bankruptcy or consolidation plan (if applicable)
- Copy of all borrowers drivers licenses (enlarged to 150%)
You can download a documentation list on the Getting Started or Downloads pages.
Point of contact during the process
RescueRefi.com will be your eyes and ears during the process. We will keep you up to date on what has happened and what is coming next at all phases of the refinance process. Keep in mind that once the file is submitted and approved for processing, there is little for the client to do except be patient! There isn’t the typical back and forth process of rate locking, underwriting, conditional approvals, final approvals, etc. that you have with an institutional lender refinance.
You then simply wait for your loan to be purchased by the hedge fund, for the appraiser to visit your home and your new loan documents to be prepared (assuming the appraisal value comes in at or below the necessary value). It is a very simple process from the client’s perspective (but we understand it can be nerve wracking!).
What’s the Catch?
There’s always something, isn’t there? The reality is that this is a new program designed in response to a recent phenomenon – the meltdown of property values since 2008. Although this program has been tested and is successful, it just hasn’t been around long enough to guarantee that it will work for everybody.
There is no guarantee that the Hedge Fund Professionals will be able to purchase your loan from your lender. They will make every possible attempt to reach an agreement with the lender, but there will be situations where this is just not possible.
Also, situations may arise where the initial property value was estimated to be lower than what the final appraisal value turned out to be. This would cause the final loan amount to be higher than expected and may cause your debt-to-income ratio to be too high to qualify. Unfortunately, it is not until your loan is purchased from your lender and the final appraisal value is obtained that we will know for sure that you qualify. Because of this, we can’t guarantee upon submission of your package that your Underwater Refi will be successful.
Rest assured though, that we will do our very best to make sure that your case is right for the Underwater Refi. RescueRefi.com will review the loan package and only submit it to the Hedge Fund if we feel it will work. The Hedge Fund will also review your package within 48 hours of submission and if they feel it won’t qualify, you’ll receive a full refund. Only after these two review procedures are complete will your file be added to the pool of loans for purchase.
You must weigh the benefits and risks of the program and decide for yourself whether entering the Underwater Refi program is right for you. We will do everything in our power to help you analyze your situation and come up with the decision you are most comfortable with.
Our operators are standing by anytime day or night to take your call. Call our Toll Free hotline or fill out the form to the right to receive a fast response to your inquiry.