So having been frustrated and a bit discouraged by the conversation with Ditech, I decided that it would be best to go to Portfolio Lenders. These are banks that actually hold the loans they orginate and do not need to sell them off to investors in the secondary market. Being in California the two biggest players are Wells Fargo and Bank of America.

I visited the branch in downtown Oakland on August 23 and I received the following information:

Wells Fargo's closing costs were $2,193 and they would take off $150 if you opened a Wells bank account. This is lower than either Ditech or Citibank. For us given the size of the loan amount - about $100K and the possible point reduction - 7.75% down to about 6.5% the costs mattered a great deal.

The rates that she quoted were as follows:

30 Yr Interest Only: 7.125%
30 Yr Fixed: 6.75%
15 Yr Fixed: 6.5%

The loan officer was very friendly and we agreed to meet on September 5th when I would bring in all the papers. Stay tuned how that goes...