Word is the mortgage business is busy. And to a degree, it’s true. We are in a situation where rates are down and the phones are ringing off the hook. If you are one of the lucky ones who can secure a mortgage at today’s rates, get it done though. The landscape continues to change and there is no reason to think that the pendulum will swing back toward “easy lending” any time soon. Combine that with a short staffed industry working at full, albeit reduced capacity you have a recipe for challenges.
Sure we are swamped, the phones keep ringing and everyone wants to get take advantage of today’s lower rates. However, it’s not that simple for us and more importantly the customers. We have told dozens of people who would love to refinance, “Sorry, we can’t get you approved”. Any one of several factors can prevent you from getting a loan. First, changing guidelines are an issue. Last week on one day notice several lenders reduced the amount of cash you could take out of your home to consolidate debt or raise cash by ten percent of the property value. This was done by email and effective immediately. Also, if you live in a condo, you have a “risk adjuster” that makes it impossible to get the lowest rate in the market unless you have 30% equity in your property. Finally, speaking of equity, most people we are talking with have a drop in property value making it challenging if not impossible to secure these rates.
Add to this the customer service challenges. Brokers, lenders and others that support the mortgage process were all struggling to survive in 2008. With that they all have lost money and are often not willing to “staff up” to meet current demand. This has caused the standard 2-3 days in underwriting to balloon to 2-3 weeks and longer. In fact, as of this writing on March 28th one of our lenders is working on loans submitted to them on February 16th. This is causing customer service problems through out the industry, especially related to rate lock periods, and purchase closing deadlines.
Finally, getting the lowest rate is the final hurdle. Every week there is a great interest rate survey published. The most recent one’s results can be found here. Read it carefully though, it gives not only the average rate from last week and mortgage rates change every day (rising and falling). Additionally, the survey always mentions the average amount of points being paid (yes, points). Points can now financially make sense and we are seeing many people run the numbers. A further discussion of points will come to this blog soon.
The bottom line is this. If you have not tried to secure a mortgage since early 2007 or before but are thinking of it, the rules have changed. The interest rate market is in your favor but the lending environment is not. Get your loan up and running sooner rather than later, even if you don’t lock the interest rate in right away. This way, you can manage all the other headaches that exist in getting a new loan approved and get the low rate you want.
