Dec 13, 2010

Medical debt, a factor against refinancing activity.

Hidden medical debts can also kill refinancing. Well-qualified borrowers with good loan-to-value ratios and steady employment are increasingly finding it difficult to refinance because of medical billing mistakes marring their credit, say mortgage bankers and real-estate agents.

Despite the record low mortgage rates this year, refinancing activity has been lower this year than was expected. According to Brian Wickert, president of Wisconsin-based lender Accunet Mortgage, "when consumers begin to refinance, there are real impediments spoiling the refi party."

According to The Wall Street Journal, some 14 million Americans have errors on their credit report because of medical collections, according to the Commonwealth Fund, a Washington-based nonprofit focused on health-care research. These routinely small-balance blemishes, which can go unnoticed for years, can be a death knell for refinancing because they can cause outright refusals—or make closing costs so high that borrowers opt not to refinance at all.

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