Sunday, December 1, 2013

The PIDs are in, but...

...I did find one aspect of the bill a bit surprising.
These happy green pieces of paper.  You'll find them in your mailbox right about now. 
According to my bill, the new interest rate is 4.53%, compared to the 2013 assessment, when it was 5.03%

Don't get my wrong - I'm not knocking the reduction that did occur.  It saves my family about $230 on our annual bill.  I'm grateful that someone took the time to make this happen. 

But my question is - why is that interest rate still as high as it is?? 

In 2012, my husband and I were able to refinance our mortgage at 3.25%.  Presumably, we are a bigger default risk than the public entity carrying the PID loan.  Furthermore, our mortgage is for a longer period of time than the PID loan, and shorter loans tend to be associated with lower rates.   Further still, our refi rate was not the lowest achievable because, while my husband is a conventional salaried employee, I am self-employed, which is the kiss of death from a lender viewpoint.  My financial profile tilted the bank's assessment away from what otherwise might have been an ideal risk rating for us. 

I am ignorant of the financial realities behind this kind of municipal tax-like transaction.  I have no idea why a robust public entity would not be capable of securing interest rates approximating what a couple of old fart homeowners could qualify for.  Is it a function of the size of the loan, perhaps?  But as we all learned during the 2008 financial crisis, loans get pooled to effectively become very big loans, and the rate of 3.25% was widely available across the board to high-scoring homeowners, so I don't know what the deal is. 

If anyone has any insight on this issue, please comment or email. 

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