"I need to do a refi cash-out to get money to pay my mortgage."
Here is a scenario: Bwr with a FICO in the 550's, is currently 2 months behind on their mortgage, and needs at LEAST 85% LTV, but would like to get 95% LTV on a refi cash out. They are going "stated income" (of course), and they need a loan for somewhere in the 420k-450k range. They want interest only...but the broker said "they will take anything they can get at this point". They need money to keep paying their mortgage. How do you like that?!?!?
I had another one today where the person had 12,000 in equity and wanted to pull it out to help get through the holidays and pay their mortgage. Poor broker only had 2 weeks in the business...and thought he had a "live one". I had to squash the bwrs dreams of a fancy holiday...and the brokers dream of getting a paycheck off this "loan". 12k would barely pay all the fees assocaited with doing a refi on a 400k property.
These are just 2 that I saw today! I could go back through my scenario book and there are plenty more. The sad thing is that NOTHING surprises me anymore. It just amazes me that somebody will "spend" $500,000 on something (a house), yet they won't spend 30 minutes doing research to figure anything out about the process, the loan, the collateral, the people involved, if it really makes sense.
There is going to be sooooo much annoying whining coming down the next 2-3 years, you are going to beg to be stuck in a room with Gilbert Godfrey instead of hearing the all these "sob stories".
(no offense to Gilbert...but can you think of a more annoying voice?!?!?!? Maybe that Janice girl from Friends....yup...the "chandler-bing" chick with the terrible laugh)
You get my point...
******After reading some of the posts, I want to make it clear that NOBODY tells the lender directly the refi is to get cash to help pay the mortgage. I have seen loans declined when it looked like that is what the borrower was doing. That is the dialogue between the borrower and the broker...and I deal with the brokers. When asked what they plan on doing with the cash (if/when they ask) the 2 main uses are debt consolidation and/or home improvements. I will make a post here shortly detailing the rationale of the "lender" side of things.