Watch out! .. contract to rate lock extensions
– from one of our favorite mortgage voices, David Reed, CD Reed Mortgage Bankers, Austin
If you know someone who is refinancing let them know there’s a log jam ahead. If you’re got a contract, prepare for a possible extenstion.
Lenders typically let their loan officers know on a daily basis how long their underwriting times are, this gives everyone an idea on how long it takes to get a loan in and out of a lender and on to the loan closing.
B-u-t t-h-i-n-g-s a-r-e- m-o-v-i-n-g v-e-r-y , v–e–r–y s—l—o—w—l—y.
Why? The obvious reason is that rates are at record lows (didn’t we just say that in recent years?) and lots of folks are refinancing their “stratospheric” 6.00 percent interest rate.
I’ve seen such log jams before but it’s different this time for a couple of reasons and they’re big ones.
There are fewer loan officers because there are fewer lenders.
Remember the (well-deserved) lender carnage over the past 12-18 months? Lenders went out of business left and right and along with them their bevy loan officers.
Plus, and more evident from this desk, there are fewer mortgage brokers in the business as well.
When mortgage applications hit such high levels, all clamoring for the same piece of interest rate pie, things began to slow. But due to the fact that there are simply fewer people to process these loan requests, it’s compounding the situation big-time.
Yes, Wells Fargo is still catering to mortgage brokers but they recently lowered their ’45 day’ interest rate lock lower than the ’30 day’ to persuade borrowers to give them more time to process their loans. That’s odd, don’t you think?
Last month for instance our underwriting times were typically 2-2 business days. Now it’s approaching 10 days for conventionals and 5 days for government loans.
This is a fluid number, I know, as workflows can increase or decrease as loans get funded but still, that’s a long, long time and I’m seeing loan approvals from other lenders take 3 weeks or longer after the loan has been fully submitted!
Two things from this:
1: Consider the underwriting delays when writing an offer: if you can get 45 days on a contract instead of 30, everyone will sleep better at night, and
2: If you’re a consumer and you’re locked in, check with your loan officer to make sure your interest rate will stay protected as lenders adjust to the higher loan volume.
V e r y i n t w e s t i n g …. and explains an awful lot
Last Week I attended the Austin Mortgage Bankers Association meeting and heard some very interesting statistics from John Heasley, Executive VP and Counsel for the Texas Bankers Association.
In 2004-2006, half of all mortgages placed in the United States had no down payment. Half. And do you know the median down payment for ALL loans placed during that same period?
And another statistic provided to me by another banker who shall remain nameless just in case he’s wrong? I asked this associate if he knew what the most recent statistics as to the amount of market share currently occupied by mortgage brokers compared to bankers.
Before the bust, depending on where you look, mortgage brokers commanded a 65% market share. That means two out of three loans were originated by a mortgage broker.
Direct lenders made up the balance.
Now? My friend said he thought the most recent numbers showed only a 20% mortgage broker market share compared to mortgage bankers.
© Julie Nelson and The Nelson Project at Keller Williams Reatly, 2008-2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Julie Nelson and The Nelson Project at Keller Williams Realty with appropriate and specific direction to the original content.