If you are considering refinancing your mortgage, you should submit an application to your mortgage broker or mortgage banker as soon as you can. By this, I mean, this week or, certainly by some time next week. The low interest rates are causing a mini-boom in refinance business that the banks are not prepared to underwrite and close “efficiently!”
Over the past year, the banks have shed mortgage staff in droves due to the slowdown in business. They are not likely to ramp up now (or at least not too quickly) to account for a few weeks’ worth of refinance business. And, when they do, there will be a tremendous learning curve for new hires (think Mt. Everest-size curve) to account for the new “mountain” of new regulations recently passed. This will result in delays in loan closings; further frustrations by borrowers; and, in the extreme, increased costs to extend interest rate when the rate lock periods expire due to bank delays.
As of now, most banks are taking approximately 5 days to underwrite (i.e. approve) loans after they receive a full loan package. This is up from 1-3 days at the beginning of August. I anticipate that these times will increase to 10-14 days by the end of the month (assuming that rates stay this low or get lower) and, possibly 21 days, by some time in mid-to-late September. Back in November 2010, when we had the last refinance boom, 21 days was the average underwriting time for most lenders. And this was before Dodd-Frank went into affect on April 1, 2011 creating a wave of new disclosure and compliance requirements! In addition, as noted above, the banks now have many less people working there than they did then. And, finally, throw in the fact that it is the last few weeks in August when many people are away on vacation, and you have a recipe for massively slow underwriting times coming up!