After the last downturn in the housing and mortgage industry, many mortgage lenders made severe cuts in their mortgage processing staff. Currently, these financial institutions have a shortage of in-house employees who have the necessary skill set needed to handle a sizable increase in mortgage applications from borrowers looking to refinance from high interest rate to low interest rate loans.
Many of these borrowers recently became eligible to take advantage of the Home Affordable Refinance Program (HARP) after the program’s latest revisions. After announcing the changes to HARP, the director of the Federal Housing Finance Agency (FHFA), the federal agency responsible for overseeing Fannie Mae and Freddie Mac, estimated that as many as 3.5 million homeowners could qualify to refinance their mortgages.
Most Mortgage Applications for Refinancing
Michael Fratantoni, who serves as vice president of research and economic for the Mortgage Bankers Association (MBA), stated that some borrowers have reported waiting as long as 60 to 90 days to have their mortgage refinance applications processed. Although lenders have ratcheted up their mortgage operations to maximum capacity, many still have trouble keeping up with heavy mortgage application workloads.
Some homeowners have turned to community lenders and brokerages who do not typically service HARP mortgages.
The MBA report that the number of mortgage refinancing applications represents about 79 percent of the total applications for mortgages for the week ending June 22, compared to 80 percent the previous week.
Mortgage activities fell 8 percent off the previous week because the number of borrower seeking government-insured loans, which actually doubled the week before, declined. Borrowers seeking refinancing under the HARP mortgage program submitted about 25 percent of mortgage refinance applications.
About the HARP Program
HARP, which the federal government launched in 2009, originally had a target of helping as many as 4.5 million borrowers refinance their mortgages. However, the structure of the initial program and tighter loan underwriting criteria made it difficult for homeowners saddled with underwater mortgages to qualify.
The HARP program had numerous obstacles to refinancing. The primary problem concerned the requirement of an 80 percent loan-to-value (LTV) ratio. Homeowners with underwater mortgages, meaning they owed more on their outstanding mortgage balance than the market value of their home, could not qualify to refinance into low rate interest loans.
After some heavy public pressure, the FHFA decided to eliminate the 80 percent LTV requirement. Only borrowers with mortgages insured by Fannie Mae or Freddie Mac qualify for HARP.
Speeding up the Refinancing Process
Most borrowers seeking refinancing prefer to submit their application to the mortgage lender who originally approved and service their mortgage. From the borrower’s perspective, the lender already has the borrower’s information. Therefore, the refinancing process should go smoother. However, more stringent underwriting made the process more demanding.
Real estate attorney Andrew Latos, who operates in Astoria, Queens, reports that he increased his fees for real estate closings. Latos said the closing process, which formally took about two hours, now takes as long as five or six hours. Borrowers who want to bypass the arduous process of refinancing their mortgages have turned to mortgage brokers.
A mortgage broker can track a loan application and keep in contact with the lender as the application flows through the process. Mortgage brokers earn a fee equivalent to 1 to 2 percent of the loan amount, which lenders usually pay.
Brokers can also run the numbers to determine if refinancing makes good financial sense for borrowers. For example, the president of SunQuest Funding in Cranford, N.J, Mark Yecies, recounts a borrower who he advised not to refinance because the borrower’s monthly mortgage payment went most toward principal.
According to said Stephen Trayte of NYCB Mortgage Company, a subsidiary of New York Community Bank., homeowners should investigate mortgage refinance with a community–based lender. However, community lenders have also experienced longer processing time, says Travte. His institution’s mortgage refinance processing timeline, which use to average less than 30 days, has increased to 45 days.
He recommends borrowers lock in their interest rate.
Large mortgage lenders, such as JPMorgan Chase Wells Fargo and Bank of America, have started to hire more staff and open additional underwriting facilities to handle the high volume of refinance applications.
Tips for Homeowners Refinancing
Homeowners who plan on a mortgage refinance need to move quickly to take advantage of the low interest rates. Following are some things borrowers can do to quicken the processing and avoid delays:
- Fill out the application completely
- Call ahead to find out what documents you need, including W-2, tax returns, bank statements and attached them to your loan application.
- Complete your research of lenders and choose one to submit your refinance application
Once you gather your document and complete your research, submit your application. Do not wait to see if mortgage interest rates will decline. It could easily end up costing you more.