Mortgage Refinance

My husband and I bought a house in October with a loan without documents and ended up having to split our mortgage and have two small loans. Our mortgage service provider recently called and said they have been unable to sell our mortgage and refinancing our loan would be no cost to us. The woman I spoke to said they could combine the two loans and we get a better interest rate ... sounds good

But is it legitimate? Is this something I should be concerned or is this something that happens often?

It is true they may not be able to sell your loan.
This is not your problem.
The repairman is fair compensation for those who possess today.

You can have a 1st and a 2nd 80% to 20% (If you have 100% financing)
It is certainly possible that a different loan will be easier for them to sell, but you do not know if it's better or not.

Do they want to refinance both your 1st and 2nd into one loan or just refinancing your 2nd?

You should get advice directly from an independent consultant. Find out what kind of loan they want you to post and info here.
So after your current type of loan and interest rate and payment amount, and what your loan proposal, the term rate and payments will be.
You can get good advice if you provide all the info.

You are not onligated refinancing your loan. Many authors loan can not sell today 2nds. Usually 1 is not the issue.
If you are satisfied with your loan, do not be under pressure.
In what state you are You Know?

I worked in the real estate industry for over 10 years and have never heard of such a thing happening - but it does not surprise me. I would be suspicous because they can not sell your loan. I wonder what makes it so undesirable to other lenders. Obviously they want you refinance to make it easier to sell - they are probably trying to make your loans more profitable. On the reverse it is possible that your loan is less desirable for lenders, because it is too large an amount based on the value of your home and maybe they are ready to cut a deal to unload. In both cases, it is probably legitimate - just be very careful about the length of the loan, rates, penalties and return all other possible costs. Ask them what they now call for escrow services, PMI (if you have), and what the costs will be.

just get all the information and make a decision based on the total cost of the loan over its total

Sounds legitimate, just to make sure she put in writing before signing anything. And make sure it is not put into a loan adjustable or interest only.

You can also check around for rates. Someone may have something better.