What can I do about my mortgage?

My husband and I bought our house in central Florida in June 2007. It was appraised at $ 145,000 and we had a 100% loan for $ 138,000. We still owe $ 135,000 and are current on our payments. However, we tried to refinance to get a better interest rate (currently 6.5%) and were approved by our current mortgage company for a refi at 5.5%. The house did not appraise out, though. Even with all our upgrades and remodels, the house appraised for only $ 97,500. This seems a little low to me, considering that the county appraised it at $ 95,000 and they usually appraise for significantly less than market value (it was $ 119,000 when we bought the house, for comparison). We did not see the actual appraisal since it was free through the mortgage company.

So, I think our appraisal came in low, but any which way, it wouldn’t have appraised for enough to get the refinance. We don’t qualify for any of the gov’t-sponsored mortgage programs, like the refi or mod recently set forth, since we haven’t had a change in income or anything like that. I don’t understand why our same mortgage company won’t refi us, despite the low appraisal, since they are holding the loan either way. We are also paying out the @$ $ for PMI at $ 110 a month! Our total payment would have dropped about $ 200/month if the refinance went through. We are more likely to default with a higher payment so it makes no sense that our lender won’t approve the refi just because of the appraisal.

Are there loan programs out there to help us refi for the amount our home appraised for? We were never planning on staying here for the long-term, 5 years tops, and now there is a possibility of job loss or relocation. No matter what happens, we have to figure out what to do with our house. Our lender is required by law to work with us during a short sale but we don’t want to have to pay the deficiency, which would be significant, or the taxes on it.

PLEASE HELP! Please no solicitations, I’m just looking for answers and explanations, not ads from lenders!! Also, no judgments about how we shouldn’t have taken out a loan for 100%; what’s done is done.
Also, I don’t mind paying PMI but we are getting screwed on it. It is costing us over 10% of our monthly P&I payment (which is less than $ 1000) at $ 110/month. We got totally screwed by our lender on this; a mortgage broker had quoted us half what we’re paying now, as far as PMI goes. Our lender is Wells Fargo, a HUGE company that has just acquired other banks, making them even bigger. There is no reason for them not to work with us on this, but I don’t know how to approach them about it, other than call customer service and get the run-around again. Our local office is the one that denied us the refi.
I am not looking for people to tell me “Be happy with what you have, just keep paying your mortgage.” If we have to move b/c of job loss or relocation, we aren’t going to be able to keep paying how we are now. I’m looking for a solution to lower my payments (making renting it out easier) or get out of the mortgage entirely, as one of these problems is imminent (next few months).
Thanks for the replies. The amount we refinance would have actually gone up to about $ 145,000 b/c we would have to add closing costs in, but the PMI amount would be reduced (don’t ask me how, I don’t understand how they arrive at those numbers!), bringing the total to about $ 200 less per month b/c of the decreased interest rate. I can somewhat understand how they don’t want to refinance us b/c of it is a business but at the same time, we would end up paying more over the long term b/c of the new amount plus additional interest for 30 more years. The risk of them not refinancing us is that we are more likely to not be able to pay the mortgage at what it currently is versus the $ 200/month less. And, if the job is lost, it’s not just a matter of $ 200 less per month, it’s a matter of losing $ 6000/month income, which means NOTHING will get paid and the house is completely lost unless we can somehow get it rented out and find a cheap rental for us to live in.
The issue with it being rented out is that nobody is going to pay our mortgage with their rent. P&I, taxes, PMI and insurance come to $ 1165/month. We’d be lucky if we could rent it for $ 1000. So the $ 200/month would help us there.

We closed our homeloan on a home we built 3 months ago and final appraisal was$ 245,000 which is what it needed to be around for approval since we were borrowing $ 190,000. we already owned the land prior to building. After closing we went to refinance with a different company who approved us at the lower rate only one thing was wrong…the appraisal came in at $ 160,000. Needless to say we were shocked since apparently our home depreciated $ 85,000 in 3 months!! after reviewing original appraisal we found many misrepresentations of supposed home values used for comparisons, as well as an inflated value of our land already owned and when I contacted lender they said that agent was fired for questionable practices and that was that. Soon after they sold my loan to another company which was also shocking since this bank bragged about how they dont sell their loans off. can i sue for this or what? what type of lawyer? Any help would be great

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