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We've got an FHA loan on our house with a 4.75% interest rate.

We get a lot of seemingly junk mail but one item from "American Financial Network" caught my eye:

The Federal Government recently passed the Economic Stimulus Act (H.R. 5140). Homeowners with FHA mortgages have the opportunity to lower their monthly payments through an FHA streamline loan with no points or appraisal fees. Recent changes to FHA guidelines ahve made it possible to Streamline your current FHA mortgage to a new lower rate.

As a part of this Stimulus Act, your mortgage can now be streamlined to a 30-year-fixed loan with an interest rate as low as 3.875%. This loan will be insured by the Department of Housing and Urban Development and is subject to FHA underwriting guidelines. Call 866-444-2494 for answers to any questions that you may have

This really is an extraordinary opportunity, and we look forward to serving you. Please call one of our polite and informative representatives today.

There's a lot of red flags here that make me suspicious but I'm wondering if there's any real value I could be overlooking.

Thoughts? Could this be legit?

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    Who holds the mortgage you currently have? Try calling them to see if you can re-negotiate the rate with them first. In the past, I found that it was easiest to deal with the current lender. They would, of course, like to continue charging you 4.75% interest, but between the options of lowering the rate to 3.85% (say) or losing you entirely as you take your business elsewhere, they will prefer the former.
    – Dilip Sarwate
    Mar 18, 2012 at 17:41
  • @DilipSarwate BoA. Great idea - should I collect other quotes first? I'm wondering what kind of "evidence" of a better deal I need prior to contacting my bank.
    – Mike B
    Mar 18, 2012 at 17:57
  • You don't have a better deal until you have paid the application fee to FlyByNight Mortgage Co, they have run a credit check on you, etc and you have a written offer from them; e-mail offers don't count, and BoA is even more knowledgeable than you about what is available out there. BoA might charge you a tad more interest than others, but be willing to waive some of the fees that other lenders will be charging you. Try them first, and if they refuse to countenance any refinancing, talk to others. Remember the meaning of mortgage: it is "death grip".
    – Dilip Sarwate
    Mar 18, 2012 at 18:23
  • @DilipSarwate I had the exact opposite experience with BoA - they offered slightly lower rates, but significantly higher (break even point was ~5 years) closing costs.
    – littleadv
    Mar 19, 2012 at 0:20
  • @littleadv Well, that might just be BoA for you, and the fact that this is a FHA loan (as you emphasize in your own answer) could also change the parameters. I was able to reduce a couple of closing costs (on a non-FHA mortgage) through negotiation but then, I was dealing with a local bank and not BoA too.
    – Dilip Sarwate
    Mar 19, 2012 at 0:35

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This is obviously a spam mail. Your mortgage is a public record, and mortgage brokers and insurance agents were, are and will be soliciting your business, as long as they feel they have a chance of getting it. Nothing that that particular company offers is unique to them, nothing they can offer you cannot be done by anyone else.

It is my personal belief that we should not do business with spammers, and that is why I suggest you to remember the company name and never deal with them. However, it is up to you if you want to follow that advice or not.

What they're offering is called refinance. Any bank, credit union or mortgage broker does that. The rates are more or less the same everywhere, but the closing fees and application fees is where the small brokers are making their money. Big banks get their money from also servicing the loans, so they're more flexible on fees. All of them can do "streamline" refinance if your mortgage is eligible. None if it isn't.

Note that the ones who service your current mortgage might not be the ones who own it, thus "renegotiating the rate" is most likely not an option (FHA backed loans are sold to Fannie and Freddie, the original lenders continue servicing them - but don't own them). Refinancing - is a more likely option, and in this case the lender will not care about your rate on the old mortgage.

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