With interest rates still near record lows, the pace of refinances in the area remain strong. One of the downsides to a refinance is that you have to pay most of the closing cost fees over again. However, a few years back some relief was given in Virginina for the recordation tax. The idea was that if you refinance with the same lender, you won’t be charged a recordation tax for the recording of the new deed. This would mean thousands saved for qualifying homeowners.
Of course, qualifying for the exeption isn’t as easy it seems. Fairfax County is interpreting the qualification rules in a strict fashion. Per the Fairfax County Land Records guidelines, legal requirements to qualify for an exemption for refinancing with the same lender are:
1. The transaction is for the purpose of refinancing or modifying an existing debt.
2. The refinance or modification must be with the same lender. The Attorney General of Virginia has opined that the term “same lender” does NOT mean the original lender. It means “the lender providing the refinancing must be the same as the lender now holding the existing debt being refinanced.” 1992 Report of the Attorney General, 181, 183
3. Recordation taxes were paid on the original deed of trust.
The real problem here is the “same lender” – it is interpreted as whomever is currently holding the note, not the one that you originally made the mortgage with. The guidelines from Fairfax County then goes on to give some examples of transactions of transaction that would not qualify for the exemption:
1) This is the case of Bank of America and Countrywide. According to the 10K that Countrywide filed with the Securities and Exchange Commission, the merger agreement between Bank of America and Countrywide “provides for Countrywide to merge with and into a wholly owned subsidiary of Bank of America.” A subsidiary is a separate legal entity from the parent company. Therefore, an existing Countrywide loan being refinanced with Bank of America is NOT a refinance with the same lender.
2) JP Morgan Chase and Chase Home Finance, LLC. (Separate entity). However, we just received a letter from JP Morgan Chase stating that JP Morgan Chase is the actual note holder for deeds of trusts issued by JP Morgan Chase Bank dated on or after January 1, 2005, which are currently being serviced by Chase Home Finance LLC. In those instances the transaction would qualify as a same lender refinance.
3) Wells Fargo Home Mortgage and Prosperity Mortgage which is an affiliate of Wells Fargo Home Mortgage. (Separate entity).
4) Wells Fargo Bank, N.A. is a subsidiary of Wells Fargo & Company.(Separate entity).
5) The payoff statement shows that wired funds are to be sent to X bank for further credit to Y lender. If Y lender is different than the lender providing the refinance loan then it is not a refinance with the same lender. We have found this in Bank of America/Countrywide refinances. The Countrywide payoff statements instruct the settlement agent to wire the funds Bank of America and to further credit MRC. MRC is MMA Realty Capital. They are an investment firm. According to our research, MRC is the current lender, not Countrywide. Countrywide appears to be servicing the loan for MRC. This would not qualify for a refinance with the same lender exemption.
They then give a few examples of transactions that could qualify:
Contrast this with Wells Fargo Home Loan which is a DIVISION (not a separate entity) from Wells Fargo & Company and BB&T Mortgage which is a DIVISION of BB&T Bank. A division is not a separate entity. Transactions in these situations would qualify for the refinance with the same lender exemption.
As you can see Fairfax County is pretty strict on this and more likely than not you would have to pay the recordation tax on your refinance. When doing a refinance, do your homework and don’t take it for granted that you will get a break on the closing cost with your refinance.