A dear client of mine encountered disappointment in trying to refinance recently.

From Jeff in the San Gabriel Valley:

“I wanted to say that I enjoyed our discussion yesterday about the housing and lending markets.”

“As I mentioned to you, I find myself in uncharted waters trying to figure out how I can refinance my home mortgage now that I am underwater. It seems like the normal disclosure rules of business no longer apply.”

“Obtaining information about refinancing my home has left me frustrated During my research and questionings, it seems that the consumer needs to be highly aware that information provided by lenders may not be the whole picture. I was looking into negotiating a settlement with my second mortgage and they invited me to make a reduced offer of settlement. They did not tell me the drawback would be a 1099 tax form for the balance over what they forgave. This would leave me owing taxes on the difference between the settlement amount and original amount owed. If I took this deal, I would have had to pay thousands of dollars to the IRS. The other information they neglected to provide was that any settlement on the loan, that is, anything less than payment in full, could have a negative effect on my credit score.”

“My point is that I had to speak to many different people, each giving me a small pieces of the puzzle, to figure out the true picture. I don’t think this is right. I don’t know if the lenders are purposely leaving out important information, or if it is simply my duty to ask every possible question about every possible pro and con. Perhaps this is a “buyer beware” situation. Nevertheless, it is disturbing and worrisome.”