FHA streamline refinancing with American Financial Network, Inc

I bought my home at the end of 2009. Even though I expected housing prices to fall, my family was growing and I needed to either move to another rental or buy. Did not want to hassle with another rental, so I bit the bullet and bought a brand new house taking out a 30-year fixed FHA loan at 5% APR.

As interest rates continued to plummet, I have been entertaining the idea of refinancing. I could not refinance to a conventional mortgage, and refinancing an FHA loan turned to be tricky: with the refinanced FHA loan I would pay higher mortgage insurance (due to a recent rule change), so interest rates needed to fall far enough to result in any savings. I eventually used the FHA streamline refinancing to lower my interest rate from 5% to 3.875% APR. I’ll explain how the process worked and describe a couple of caveats to help those interested in refinancing.

First, if you’re not familiar with FHA loans, here is a quick primer. FHA loans are backed by federal government (Federal Housing Administration). You get an FHA loan form a regular bank. Not all banks specialize in FHA loans, but many do. If you default on the loan, the federal government will cover the bank’s losses. For a potential borrower, an FHA loan may or may not make sense. The main advantage is that it requires a smaller down payment (currently 3.5%, compared to a typical 20% for a conventional loan). An FHA loan comes with the price, though: you will pay additional fees for loan origination and may need to pay higher (and longer) mortgage insurance (PMI). So if you can — and are willing to — come up with the required down payment for a conventional loan, the FHA option would make little (if any) sense; otherwise, it’s probably the only way to go.

Now, back to refinancing. At the time of falling real estate prices, unless you have enough equity, there are not that many refinancing options. The good news for the FHA mortgage holders is that they can use FHA streamline, which greatly simplifies the process: there is no appraisal, no equity requirements, no extensive credit check, no income verification. The basic prerequisites for FHA streamline include an informal employment check (you are expected to be employed or self-employed) and more or less reasonable FICO score. Federal government requires that your monthly payments after FHA streamline refinancing were sufficiently lower (about $100 or so for a typical loan) than the original payments (see FHA Streamline Loan Requirements).

If you are a potential target for FHA streamline, you may be getting postcards with ads proposing very appealing rates. Make sure you read small print and understand the limitations: most do not guarantee these rates or apply them to variable interest loans.

One day, I got a postcard from American Financial Network, Inc (or AFN) with the ad promising FHA streamline refinancing to a 30-year fixed loan with sufficiently low interest. The postcard looked similar to this one:

AFN Post Card

AFN postcard

I called the number, talked to an AFN representative, and liked what I heard. After dealing with a couple of other refinancing organizations, I was genuinely impressed with  AFN’s representatives and process. People were nice, friendly, and straight. The process was very efficient. There was one BUT, though (more on this later).

On the initial call, an AFN representative explained how the process worked and what to expect. I don’t remember now if I verbally provided the info for the initial estimate or if I sent the paperwork, but in a day or so, I got an offer for streamline refinancing to a fixed 30-year loan at 3.875% APR with no fees and no points. I was a bit suspicious about the no fees part, so I asked to confirm and was told that there would be no fees.

The process took about a week with most of paperwork handled over e-mail. I received the final papers, signed and sent them using a prepaid carrier service. A notary public came to my house to go over documentation and signing. Unlike my experience with the original mortgage issued by Wells Fargo, none of the paperwork were lost and I did not have to redo anything. It was a very pleasant experience. Within a month of closing, American Financial Network sold my mortgage to U.S. Bank, as it was expected (there was a chance for the loan to be refinanced with Wells Fargo, but it did not materialize). I don’t really care whether my mortgage stayed with Wells Fargo or moved to any other financial institution. I have no issues with U.S. Bank thus far.

Now, remember how I mentioned that I had been promised that there would be no fees for refinancing. Nevertheless, I noticed a few fees in the settlement statement. I called my broker and asked about the fees. The broker said that the federal government required them to disclose “typical” fees, but these were only included for reference. He claimed that the government did not permit finance charges for FHA streamline loan refinancing, and the “fees” that appeared in the statement were offset by a credit (there was in fact a line item showing credit). I did not give this much thought, but three months later, when I showed my settlement statement to my accountant during tax preparation, I found out that I was actually charged a loan origination fee in the amount of $1,195. According to my accountant, this fee was not offset by any credits.

I sent an email to the broker at American Financial Network, who had handled my refinancing, asking to explain the discrepancy, but didn’t get a response. So I assume, that my accountant was correct. Now, I don’t really mind the fee. If I were told about the fee in advance, I would still go ahead. But I’m quite upset that I was not told the truth. Another possibility could be that the “no points, no fees” refinancing actually meant no out-of-pocket fees (i.e. there would be a fee, but it would be bundled with the new mortgage). If this were the case, I would classify it as deception, because for a typical consumer, there is a difference between no fees whatsoever and no out-of-pocket fees. I repeatedly asked my broker how much my refinancing would cost, and always received the answer that it would cost nothing. Now, maybe the answer meant nothing out-of-pocket, but this was not what I asked.

Anyway, I’m not sure if I take this issue further (e.g. file an FTC complaint for deceptive advertising), but in the meantime, here are some suggestions that may help you avoid your mortgage refinancing mistakes and missteps:

  • When you get a quote, ask exactly how much it would cost overall, not just out-of-pocket. Ask for a confirmation in writing (e.g. via email).
  • It was helpful to learn the exact amount of my monthly payment after refinancing and compare it with the current payment. However, this was a bit misleading, since my new payment was essentially adjusted for a longer term (I have already been paying  for 2 years out of 30 of my original loan, so the new 30-year loan essentially extended my mortgage to 32 years). I don’t know if it’s possible, but I would ask to compare original payment with the hypothetical payment after refinancing adjusted for the remainder of the original term. Even if this would not be the actual term of the refinanced mortgage, these numbers would offer a more accurate comparison.
  • The total amount saved over the lifetime of the mortgage was helpful (in my case, it was about $90K); make sure you get it.
  • Keep all paperwork, names, contact info, and communication.
  • It could be helpful to go over the draft of the settlement statement with your account before you sign up.

Best of luck.

P.S. If you are savvy in accounting, below is a copy of my settlement statement (with personal info removed). See if you can figure how much my refinancing fee was.

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UPDATE (3/28/2012): One day after publishing this post, I received a phone call from the broker at American Financial Network, Inc. He said that he had received my email and ran my case by someone on the accounting side. They did not find any discrepancies except that I could get $500 cash if federal regulation allowed cash-out refinancing (which apparently it does not). He tried to explain how the numbers worked, but the explanation still made little sense. I asked the gentleman to send me the explanation via email, so I could include it in the post (or try to make sense out of it after seeing it in writing). He promised to get back to me. A few hours later, I got a phone call from another person, who claimed to be in charge of verification of my settlement. He said that after checking the numbers one more time, he found a discrepancy in the amount of $2,017.18. According to this gentleman, this was a human error caused by similarities of a couple of numbers. He apologized and promised to issue me a check within 72 hours. A day or so later, someone else called to verify my address and delivery preferences. Yesterday, I got the check via certified mail.

See also:
The Federal Reserve Board: A Consumer’s Guide to Mortgage Settlement Costs
FHA streamline refinance gets cheaper

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17 thoughts on “FHA streamline refinancing with American Financial Network, Inc

  1. Thanks for this information. I got the same kind of letter and had wondered whether American Financial Network’s offer was too good to be true. The letter I got though may have been a little different in that it says that there is no appraisal required, suggesting that other fees may be part and parcel. Maybe they’ve changed that since they’ve gotten complaints.

  2. Yes, the last promo I got from AFN claims that there are no “out-of-pocket” fees, which is a bit more accurate.

  3. I received a similiar ad in the mail today, and it clearly states as the first bullet point, “No Fees are associated with this offer” —

  4. I do not recommend using this company. I have been working with them for two months on a streamline. I was originally told that I could close in September. Then they said they needed more docs and changed it to October. I was told that the loan had to be approved by October 19th to close. Once again I called them and said they needed for documents that had to be turned in by the 23rd in order to close in October. I got them all the documents back in time. I continue to contact their office daily for status updates cause they are terrible at communication. I was told that the loan would have to be approved by the 23rd, then the 24th. I continued to call because they have not called me. Today October 25th I am being told that it’s approved once again but now it’s too late to close and I will have to wait until till November, I do not believe this company and believe that they will have some excuse to not close in November. I will let you all know as I gave them a deadline of 11/03/12 for final approval in written communication.

    If you do decide to use this company I would avoid going through Rich Herrera if at all possible.

    • In the exact same boat, We have gone as far a signing closing documents with a notary and here we are at the end of the month and the loan is still not funded with the title company. Rich told us they could still fund Monday however, I am begining to doubt this is going to happen. Monday I will be calling the Title company to see how to get our escrow back if the loan does not close….so disappointed in this company, would NEVER recommend them to anyone!

  5. I just tried to call the 800 number listed on the mail piece and it was registered to a Pacific Home Loans in Newport Beach. If this company is using the name of American Financial Network, but operating under Pacific Home Loans, it would seem that the liability would fall on the person sending out the mail.

  6. Concerned…… I am starting to have trust issues with these guys as well. I was sent disclosure documents which I was told show only preliminary numbers and that i must sign off before they could provide me with actual finance options available through other banks. I worry that I am actually agreeing tinge rest rate provided on the current documents which I am not actually happy with and in the end they will just sell my mortgage and I will be stuck. Does this sound like the same process that others who have tried to go to closing have been through, no notary person has come to the house or anything but onestly having trust issues please help also speaking to Rich Herrera which really brought out a red flag ????

  7. Wow, nothing but negative things being said about American Financial Network! This company is obviously being true to their written letter when it comes to their clients and potential clients. The writing is on the walls here, this company is obviously having fundamental issues with staying true to their word and commitment and anyone that sees this should turn around and run for the hills. Remember who you are really dealing with here…..Banks and lenders!! What do you expect at the end of the day? Hire an expert to see you through your refinance or loan mod. It’s the safest bet. Thanks for being here. This is some useful related info: http://yourcredit.co.nf/?page_id=221&preview=true&preview_id=221&preview_nonce=c79fa702b8

  8. You think the getting the mortgage is bad? you ought to work there! Bells and whistles to get you in with the premise of a “family” company, and unceremoniously dismissed with no warning whatsoever. There was about of 50 of us yesterday. We were not being paid even for the rest of the day!
    Let alone severance.

  9. Any loan taken out has costs, a no fee or no cost loan has the same fees as a full cost loan. The rate sets the fees, higher rate less fees and lower rate higher fees. This is main issue I have with lenders they don’t spell it out in the beginning. Loans are simple math, why is it so jacked up…

    Just want the truth, I can deal with it.

    HB Realtor

  10. Thank you so much for this information. I have been holding on to this mailer to call then for a week, but wanted to do some research first.

  11. I have been in the Real Estate Business for over 20 years now. Nothing in this world is free. As a consumer you should never expect anyone to give you something for free. Would you go and work your 40+ hour a week job for free? Why do you expect a LO to give you a free loan? I do not agree with deception at all in any form. Most lender’s will offer you a cheaper rate and tell you they are the best or they have no fees etc. Truth is it is all regulated by the government to the point that each step the LO takes has a time frame to meet and if not met the government fines them or will take their lic. away. If you are late getting your doc’s to them, while you may have a very patient LO, he or she is under the gun with regulations. Maybe your score is not where it should be and you are pressuring the LO for a certain Rate? Who knows what is really happening. Maybe your home is not eligible for a Streamline Refi. Just because you get a post card doesn’t mean your home meets the criteria for the loan. This doesn’t make this a bad company or untrustworthy company. You may have the same issues where ever you go.

    • Why do you expect a LO to give you a free loan? Well, I normally don’t expect anything free from anyone, but if a mortgage company advertises “free” refinancing (assuming there’s no small print suggesting otherwise), then I why should I start by assuming that this company is lying? I have no idea about the intricacies of lending. Maybe there is a government program to cover costs. Maybe a mortgage company makes money by selling mortgage to another bidder. Why should I, as a consumer, care? You say there are no fees whatsoever, then you should honor your word. Otherwise, you are a scam artist. Again, as I said, I have no problem with fees, but they have to be disclosed in advance. Btw, I recently refinanced for a conventional loan and payed no fees (other than appraisal).

  12. I have been dealing with American Financial Network since June 2016. It is now Oct 12, 2016. I was told in June 2016; I was approved for a conventional loan under conditions. Each month; I am told we are going to close and atbthe end of the month; we don’t! Always another condition to meet. My husband passed 2 years ago and I went from 2 incomes to 1. I have 13 years left on my mortgage. It will take $55 K to pay off so I was going to borrow $100 k and pay off debts. Struggling to pay all of my bills. To make a long ordeal short; I was required by AFN to pay for appraisal $475, termite inspection $200, maintance repair on the home 1800 and pay another $175 to the original appraiser to come back out to make sure repairs were completed. The home appraised for $135 K. All conditions have been met and now since 10-4-2016; I cannot get my loan officer Dennis Dodge to return my emails. I fear the refinance loan is dead. I wanted the refinance because I was starting to sink financially. Now I am at Rock bottton financially and credit wise. Be Warned, AFN is slow.

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