Undoubtedly one of those factors is loan-to-value ratio. Shaffer paid $670,000 for the duplex in March 2008. He borrowed $600,000. Zillow estimates its value now at $644,000. The loan-to-value ratio was about 90 percent when Shaffer got the loan, and now the ratio is around 93 percent. Nowadays, lenders are reluctant to let people borrow more than 80 percent of a home's value, and 93 percent is really pushing it.
Pay off equity loanYou would think that a home equity lender would welcome a refinance of a primary mortgage if the refi results in a lower monthly payment. But from the equity lender's perspective, the optimal outcome would be for the borrower to pay off the equity loan and close the account. "They probably figure if they play hardball, they'll get paid off," says Matt Hackett, underwriting manager for Equity Now, a mortgage bank headquartered in Manhattan.
Jeff Lazerson, president of MortgageGrader.com, an online brokerage based in Southern California, says equity lenders want borrowers to close their accounts "because then they can get the cash back that was in the account, and their balance sheets look better."
If lenders are trying to pressure borrowers into paying off their home equity debt, they're not coming out and saying it. They expect borrowers to figure it out themselves. Anyway, in Shaffer's case, paying off the $100,000 home equity loan isn't an option.
Delays and feesLoan officers and mortgage brokers say it's not unusual to wait for more than a month for a resubordination decision. One broker says it took more than six weeks -- from Dec. 26 to Feb. 10 -- for Wells Fargo to approve a resubordination request. (Wells Fargo has received $25 billion in TARP funds, or $175.93 for every working American.)
"So many lenders have been swamped by these -- and they're frankly not a priority," Cruise says. "Even those that are not being denied are taking 30 to 45 days, and can cost $50 to $250, depending on how much the lender wants to charge."
Not only do lenders charge fees to process resubordination requests, but borrowers incur even more fees when they have to extend rate locks in response to resubordination delays.
In many cases, lenders require rate locks of 45 days or more on refinance applications requiring resubordination.
But for homeowners in this situation, there aren't many options. They can pay off the home equity loan or consolidate the loan with the same mortgage lender. And if neither of those is feasible, there's no chance of refinancing.