Saving money is always why people want to start the hassle of refinancing. And with today’s fixed rates still around 5%, I get calls and e-mails from past clients with questions about their options all the time. It is nice to be considered their go-to guy when it comes to real estate questions, and now you too shall know the big refinancing secret strategy… as long as you live in Virginia.
In Virginia, it is essential that you start with your exact current lender.
Sure, but Doug the Internet is full of better looking deals than my lender’s web site, you say. That may be true, but the Internet is sometimes filled with people offering too-good-to-be-true deals. Don’t get me started on this topic right now because I will cover that issue later.
Again, in Virginia, if you refinance with the same lender then there is a “recordation tax exemption” for the mortgage. In my case, that would be about a $3,000 savings right off the bat! For those of you with a legal background or curiosity, you may reference §58.1-803 (D) of the Code of Virginia.
It is essential for you to know that this exemption needs to meet some very strict criteria. A local real estate attorney recently cautioned “It’s my understanding that Fairfax County is checking the MERS website on every same-lender refi and if the website shows there is an investor (e.g. Fannie Mae) then they will not allow the reduced recording fee.” So you will need to do your homework.
Bet this refi plan sounds like a good idea for those of you looking over those Truth-in-Lending Estimates right now. Everyone loves to skip paying taxes on anything if it is allowed by law, that’s the American way. But watch out for those pitchmen who say they can pull off that exemption because if it isn’t exactly the same lender then you may be going to jail for six months and paying a $1,000 fine. That will screw up your security clearance!
The refinance needs to be with the exact same lender. It has to do with being the same legal entity and subsidiary mortgage companies do not qualify. A “Division” of a bank does qualify. What?
Here are some direct examples from a recent letter from the Clerk of the Fairfax Circuit Court (3/12/09): {document was removed from site}
This is the case of Bank of America and Countrywide. According to the 10K that Countrywide filed with the Securities and Exchange Commission, the merger agreement between Bank of America and Countrywide provides for Countrywide to merge with and into a wholly owned subsidiary of Bank of America. A subsidiary is a separate legal entity from the parent company. Therefore, an existing Countrywide loan being refinanced with Bank of America is NOT a refinance with the same lender.
Other examples of transactions that DO NOT qualify for the same lender exemption are:
1. JP Morgan Chase and Chase Home Finance, LLC. (Separate entity). However, we just received a letter from JP Morgan Chase stating that JP Morgan Chase is the actual note holder for deeds of trusts issued by JP Morgan Chase Bank dated on or after January 1, 2005, which are currently being serviced by Chase Home Finance LLC. In those instances the transaction would qualify as a same lender refinance.
2. Wells Fargo Home Mortgage and Prosperity Mortgage which is an affiliate of Wells Fargo Home Mortgage. (Separate entity).
3. Wells Fargo Bank, N.A. is a subsidiary of Wells Fargo & Company. (Separate entity).
4. The payoff statement shows that wired funds are to be sent to X bank for further credit to Y lender. If Y lender is different than the lender providing the refinance loan then it is not a refinance with the same lender. We have found this in Bank of America/Countrywide refinances. The Countrywide payoff statements instruct the settlement agent to wire the funds Bank of America and to further credit MRC. MRC is MMA Realty Capital. They are an investment firm. According to our research, MRC is the current lender, not Countrywide. Countrywide appears to be servicing the loan for MRC. This would not qualify for a refinance with the same lender exemption.
Contrast this with Wells Fargo Home Loan which is a DIVISION (not a separate entity) from Wells Fargo & Company and BB&T Mortgage which is a DIVISION of BB&T Bank. A division is not a separate entity. Transactions in these situations would qualify for the refinance with the same lender exemption.
Why does the Clerk care so much about this issue? Because the Clerk may be personally liable for the uncollected money!
So now you know a little inside secret. If you are starting to look into refinancing then contacting your current lender is a must and absolutely the first call that you should make… and do your homework to make sure it is the same legal entity.
The law firm McGuire Woods posted a legal update on Refinancing with the same Lender in Virginia which is also worth reading. (I have no professional relationship with the law firm).
The Washington Post published also an article 11/4/2010 discussing how the criteria (identical lender) is complicated for the Fairfax County clerk of the court to keep track of to make sure everything is done properly.
I am looking for comments from readers who have tried to refinance and their experience… successful or unsuccessful. It may help the next reader!
Related articles
- Should We Refinance the Mortgage? (dougfrancis.com)
