Consumer complaint received 2017-06-21
Company: CAPITAL ONE FINANCIAL CORPORATION
State: MD
Product: Mortgage
Sub-product: Home equity loan or line of credit (HELOC)
Issue: Applying for a mortgage or refinancing an existing mortgage

Complaint:
I am in the process of refinancing my primary residence - the 1st mortgage owes {$310000.00} and the HELOC owes about {$42000.00} ( limit {$45000.00} ). I am refinancing since my current 1st mortgage is an Interest-Only ARM payment and I want rate stability on a 30 year fixed. Thus, the HELOC would be subordinated in 2nd lien position. My plan is to pay down the current 1st mortgage to {$300000.00} and just subordinate the HELOC. The appraisal recently came in at {$430000.00}, so the LTV is 70 % and the CLTV is 79.6 %. There are 2 major problems that occured in this process of refinancing. First, when I last refinanced in XXXX XXXX, the subordination agreement was misrecorded by Capital One ( the HELOC holder ), referencing the wrong book and page number for the 1st mortgage and Deed of Trust ( 1st mortgage at time was with XXXX XXXX but soon after was transferred to XXXX ). As a result of this misrecording, the Capital One HELOC is erroneously in 1st lien position - as a result of a typo! ( I will attach the stamped subordination agreement from my last refinance in XXXX ). Capital One is not even acknowledging their error or willing to fix the problem! The second problem is that through the refinance process, Capital One is not willing to subordinate in 2nd lien position. They have a guideline that Principal and Interest can not increase on the refinance more than 10 %. They are looking at my current Interest-Only payment of $ XXXXmo and seeing the new Principal/Interest payment of {$1400.00} on the refi and saying there is more than a 10 % increase. My response is that OBVIOUSLY the payment will increase more than 10 % because we 're going from an Interest-only payment to a Principal and Interest payment! But notice here also that their 10 % guideline is not being violated, since the Principal/Interest is not increasing more than 10 % - remember that I have only been making an Interest Only payment. By the way, even if my remaining {$310000.00} on my current 1st mortgage is amortized on the current adjustable rate of 4 % yielding a {$1400.00} PI payment, my 30 year fixed refinance payment of {$1400.00} is actually LOWER in this case. This 10 % rule results in a distorted analysis, failing to account for ARMs and also not factoring into account that some borrowers are only obligated to pay Interest only currently. I honestly do not understand how Capital One believes it will be in a better position by not subordinating. Through the refinance, I will pay the loan balance down to {$300000.00} ( 70 LTV ) on a 30 year FIXED rate of 3.875 %. The resulting Principal and Interest payment is {$1400.00}. Again, even now if the remaining {$310000.00} balance is amortized on the current adjustable rate on my loan of 4 % over 30 years, the PI payment is {$1400.00}. This does not even consider that in XXXX the Interest Only period on my loan will end and the loan will actually be fully amortized over the remaining 20 years, so the payment of course will be much higher than {$1500.00}. ( I will also attach the HUD and the Interest Only Note on my 1st mortgage from XXXX when I refinanced.

Company response to consumer: Closed with explanation