What's fascinating about Finovate Fall, the financial technology showcase presented in New York each year, is how the innovations it features reflect what 's newsworthy and worry-worthy among companies and consumers.
One presenter today, Mortgage Harmony, attempts to address the problem of millions of people who'd like to refinance to lower-rate mortgages but can't because their credit score, household income, or property value has dropped. Or perhaps they just don't want to pay the closing costs. With its product, the HarmonyLoan, homeowners can reset their interest rate automatically without incurring additional closing costs or starting again at the beginning of the loan term.
If, for instance, your 15-year HarmonyLoan mortgage was at 4 percent and you wanted to take advantage of a market rate of 3 percent, you could click a few buttons at your lender's site and the mortgage would reset automatically. If you were 11 years into that loan, the term would stay at 11 years, so you don't extend the years you're paying principal or interest. Because you're not actually taking out a new loan, you also wouldn't owe local mortgage tax--a big deal in New York, for instance, where residents pay 1 percent of any new or refi mortgage.
If it sounds too good to be true, here are some major caveats. You wouldn't get that 3-percent market rate. Instead, the loan would reset at 3.125 percent, above the market rate. That's how the financial institution makes money from the loan. The HarmonyLoan also isn't currently available for 30-year fixed loans. You must be a customer in good standing, with no late payments in the prior 12 months. And--a big and--you must already have a HarmonyLoan to begin with to qualify for the reset.
Anyone considering such a reset also would be wise to read what we say about refinancing and do an analysis with an interactive worksheet such as those supplied by decisionaide.com.
Currently a handful of credit unions offer the mortgages, which are offered as 5-year, 7-year and 10-year ARMs, as well as 15-year fixed loans.
"We think we can cure the housing crisis in America," Mortgage Harmony's president Ray Crosier told the Finovate audience this morning. (There's nothing like hyperbole to get a crowd's attention.) With mortgage rates not likely to stay so low, it's unclear how many new Mortgage Harmony customers could actually benefit from a reset. But anything that makes refinancing easier, more flexible and cheaper gets a nod from me.