These letters spell out exactly how much the old lenders are entitled to at closing and are often the only indication that a borrower is refinancing. To avoid losing customers, lenders who are about to get the boot sometimes swoop in and offer to lower their borrowers' rates or refinance them into new loans themselves. While the offers sound competitive, they aren't always so. Another source of confusion is that your current lender can do a loan for lower fees. The vast majority of the time this is NOT true.
Loans are 'packaged' to be resold.
The vast majority of lenders resell their loans and therefore any changes to the original loan require a complete new package, new closing, new note, new closing costs, new appraisal, new everything, etc. Plus, they usually come very late in the process. Borrowers who accept them can end up having to forfeit application fees or other monies to the lenders they planned on using. By learning about all of these miscellaneous traps, consumers can take advantage of today's lower rates and refinance without worrying about being taken for a ride. After all, experts say, preparation is the best defense against shady lending practices.