You may be delaying your plans to apply for refinancing.
And that could be a mistake.
Refinancing times are skyrocketing. Ascent. Homeowners are refinancing in droves, surprising lenders.
It took 57 days to complete a refinance in December 2012, according to mortgage software company Ellie Mae. That’s almost two full months.
In June 2019, before rates really started falling, it only took 38 days to close a refi.
Why the big difference? In late 2012, mortgage rates were the lowest ever, sparking a refinancing boom. And the market is ripe for again lowest prices ever.
And considering that it is much more expensive to lock in 60 days than 30 days, it’s a smart time to apply for and include your refinance.
Start your refinancing application now. (13.06.2021)
Why Lenders Were Surprised
In today’s world of AI and big data, getting a mortgage loan is still a surprisingly manual process.
People – yes, real people – still have to review every file and assess every piece of paper in the file – even if the “paper” is stored as a PDF in the lender’s database.
This intense human review wouldn’t be a problem if you had unlimited staff. But – oops – lenders laid off staff en masse in 2018.
Oops – lenders laid off staff en masse in 2018.
Lenders – like any business – want to control costs. If they expect to do less business, they will reduce their workforce. Experts predict that 2019 Mortgage rates would be over 5%.
Higher interest rates usually mean less borrowing, so lenders started cutting. Layoffs, mergers and closings became routine. The lenders were hired for a smaller future.
But then something strange happened. Instead of rising, mortgage rates fell in 2019. Descent. Many predictions were off by more than 2%.
Last week, Freddie Mac reported that mortgage rates hit 3.55%. That’s not far from the all-time low of 3.31% in 2012. When interest rates fall, financing becomes more attractive. Black Knight estimates that at today’s interest rates, 9.7 million borrowers are solid candidates for refinancing.
For lenders, this turned out to be the worst of all worlds.
“Small and Medium US Mortgage Firms,” Said, ” The Wall Street Journal November “cut staff, put themselves up for sale and close shops in a clip that has not been seen in years, a sign of increasing pressure on the real estate market as interest rates rise and long economic expansion matures.”
Looks like lenders should have held out a few more months.
Fewer loan officers to help you
Industry changes can be read off using license statistics. The Conference of State Banking Regulators Fewer than 50,000 people reportedly applied for a mortgage loan officer license in the first quarter of 2018. A year later, the number dropped to 31,882.
In the first quarter of 2018, the supervisors counted 107,386 canceled licenses. In the first quarter of 2019, the number of layoffs rose to 167,188.
In fact, fewer people get into the mortgage loan business and fewer stay. The army of loan officers waiting to help you with your application is shrinking.
Lender finances are squeezed
According to the Mortgage Bankers Association (MBA), the typical lending company issued 1,799 loans in the fourth quarter. That number fell to 1,571 loans in the first quarter, the latest number available.
Lenders have a lot of fixed costs. As the volume decreases, the cost of obtaining each loan increases. In the fourth quarter, the MBA reported that total mortgage production costs – commissions, allowances, occupancy, equipment, and other production costs and corporate grants – reached $ 8,611 per loan.
Things got worse in the first quarter of this year. At lower volumes, the average cost per loan rose to $ 9,299.
Things got worse in the first quarter of this year. At lower volumes, the average cost per loan rose to $ 9,299. The bottom line is that we have a lot of funding needs and fewer professionals to help with the process.
Is the loan application process really automated? Not really?
Automation has led to a significant increase in processing speed and a reduction in the amount of paper used. At the same time, mortgage loan officers must ensure that automation does not improperly deny a person a loan or create undue risk from improper loan approval.
With automation, too, there is a constant need for manual reviews. The FHA, as an example, now requires manual checks for cash-out refinancing borrowers with low credit and high credit Debt-Income Ratio. Some lenders use both automation and manual underwriting to ensure good results and lower risk for all loans.
Refinancing strategies before the waiting times get longer
For millions of Americans, now is the time to refinance. There are two concerns, however.
First, you can’t know if a refinance makes sense without checking the numbers and speaking to the mortgage officer. You need to know the current prices and fees in order to make a good decision.
Second, an increase in refinance requests and a decrease in loan officers and mortgage workers can slow the process down.
To win in the new world of refinancing, you have to plan ahead. If you think the interest rates are low and are unlikely to get much lower, then get yourself an interest rate.
No less important, make sure your lock-in is long enough to cover any application delays. A 30 day lock-in won’t work in a market where typical refinancing takes 38 days.
And the longer the waiting times, the longer your lock has to be. You can increase your interest rate by 0.125% by freezing your loan for 60 days instead of 30 days.
For more informations check online and see how today’s interest rates can lower your monthly mortgage costs. Given the lower prices, you might be pleasantly surprised.
Start your refinancing before the line gets too long
Nobody likes to wait in line, but that’s what millions of homeowners choose.
Be ahead of the crowd. Start your refinance and save sooner rather than later each month.
Confirm your new price (June 13, 2021)