Home Refinancing On A Ramp…27% Of Homes Now Have Negative Equity

Posted By on September 2, 2011

The positive side of this…..should put more monthly income into the economic system. But…lenders’ capacity to handle loan applications could be an obstacle for the Obama administration, which is weighing options for spurring a housing recovery, including steps to promote refinancing for underwater borrowers, or those who owe more than their property is worth. Almost 27 percent of single-family homeowners with mortgages have negative equity, according to Zillow Inc., a Seattle-based real estate data provider.

Mortgage rates at near historic lows have sparked a refinancing boom that has U.S. lenders struggling to handle the surge.

“There’s just so much volume,” said Kristin Wilson, a senior loan officer in Bloomington, Minnesota, for Fairway Independent Mortgage Corp., who has seen clients seeking lower rates climb to about half of her business from 20 percent a month ago. “We can’t just ramp up by hiring inexperienced people because they don’t know what they’re doing.”

The lending logjam extends to the nation’s biggest banks, which fired thousands of mortgage workers after interest rates rose in November through February, chilling refinancing demand. Now, the time needed to close a loan has as much as doubled to 60 days, according to Wilson and other bankers, and lenders are holding some mortgage rates higher than they could be to slow the torrent of customers, data show.

Refinancing applications are up 83 percent from this year’s low in February, according to an index compiled by the Mortgage Bankers Association, a Washington-based trade group. The average rate on 30-year fixed loans fell two weeks ago to 4.15 percent, the lowest in surveys dating back to 1971 by Freddie Mac, the second-largest U.S. mortgage-finance company.

Compounding the delays are stricter underwriting and disclosure requirements implemented in the past few years, which leave no room for shortcuts, said Stew Larsen, head of the mortgage unit at San Francisco-based Bank of the West.

http://www.bloomberg.com/news/2011-09-02/banks-in-u-s-overwhelmed-by-mortgage-refinancing-boom-after-reducing-jobs.html

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