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2009-01-22 00:12:23

RE-FI Binge Creates Logjam For Purchase Loans

The Mortgage Bankers Association recently reported that mortgage applications were at the highest levels in more than five years. Interest rates for 30-year benchmark fixed-rate loans dropped below 5 percent interest for the first time in half a century, spurring 80 percent of applicants to refinance their mortgages.

That’s good because fewer homes will hit the sales market, but it’s bad because a surge of re-fis is clogging the pipeline.
The reason? David Reed, of CD Reed Mortgage Bankers,, says, “If you’ve got a contract, prepare for a possible extension.”
Why? Simple supply and demand. “The obvious reason is that rates are at record lows and lots of folks are refinancing their ‘stratospheric’ 6.00 percent interest rate,” says Reed. But there’s a difference with this logjam, he points out. Fewer lenders, loan officers, mortgage brokers and underwriters.

“Remember the (well-deserved) lender carnage over the past 12-18 months?” says Reed. “Lenders went out of business left and right and along with them their bevy of loan officers.” And, there are fewer mortgage brokers in the business as well, he adds. 
The shortage of personnel means that underwriting has ballooned from about two business days a month ago, to almost 10 for conventional loans and five days for government loans, says Reed. Some lenders are taking as long as three weeks after the loan has been fully submitted. 
Smart Realtors can do three things to keep their buyers’ loans on track.
1.      Get their buyers prequalified by a lender before making an offer on a home.
2.      Lengthen the contract term to 45 days to secure financing
3.      Encourage your consumer to protect their interest rate with a longer term lock. Remember they can’t lock unless they’ve already applied and been approved by the lender.

 Blanche Evans is CEO of Evans Emedia, Inc. and publisher of The Evans Ezine. As an award-winning journalist, Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and twice recognized as one of the industry's most "Notables."  

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