The good news for the mortgage industry is that rates continue to be ridiculously low. This has translated into a refinance boomlet (which is significantly less than a boom) for mortgage originators. Loan pipelines that were drier than the lawns of the unsold houses in America this summer, suddenly have swelled up with new deals.
Unfortunately, like a snake that eats an elephant, these loans are stuck in the middle of the vast underwriting bureaucracy of our great lending institutions. So, until they eeck their way out the other end to the closing departments, the cash-flow positions of many of the origination shops is still tenuous. What do we expect? That we get business and are actually able to get paid on it? That would certainly upset the architects of the great Financial Reform Act who, despite their best efforts have been unable to yet completely destroy the mortgage brokerage/banking industy. Though, I note, it is not for lack of trying. They may get their wish at some point next year. But, we will need to wait and see on that.
With loan pipelines literally bursting at the seams, it is taking an eternity to close loans. I joke, but it really is no laughing matter. The banks continue to display ineptitude in their inablity to manage this business effectively. With the market so tenuous they are reticent to hire too many people. However, if they hired more competent people, some of this problem would begin to fix itself.
Most lenders are taking upwards of 3 weeks to approve a loan. And, even when they do, the conditions inserted into the commitment letters are often unnecessary and difficult to satisfy. As a result, rate locks need to be for at least 60 days. Even with that, it is taking almost the full lock period to get things closed. If possible, we suggest holding off on locking until the loan has been in process for 1-2 weeks to avoid the loss of a rate lock. Anyone considering a refinance should be prepared to wait 8-10 weeks to close. For coops it could (and usually does) take even longer.
But, at least this is a good problem to have. With little increase in home purchases (which I will address next week), things could be worse. Or, at least, that’s what my wife tells me!