If you've decided to refinance your mortgage to take advantage of today's low interest rates, be prepared to be patient and persistent. Many lenders have received a flood of new loan applications due to the lowest interest rates on record. And as a result, most lenders now face enormous backlogs of refinance requests that need to be processed.
A survey conducted every week by the Mortgage Bankers Association (MBA) shows just how swamped lenders really are. For the week that ended Jan. 9, 2009, the volume of loan applications nearly doubled compared with the previous week. Volume was up more than 50 percent compared with the same week a year earlier as well, according to the MBA's survey. (These figures are on a non-seasonally adjusted basis.) Applications to refinance hit their highest volume since June 2003, the last time there was a boom in refinancing.
Moreover, many lenders now employ fewer people, which means there are fewer hands and eyes on deck to process all of the loan applications lenders have received. And since lenders have tightened their standards and reinstated documentation requirements, each application now takes longer to process. This combination of fewer people and a heightened level of scrutiny has added to the delays.
The flood of loan applications was set in motion Dec. 16, 2008, when the Federal Reserve cut a key bank interest rate to near zero. While the Fed doesn't set rates that homeowners pay on their mortgages, the government agency's decisions do impact the general level and direction of consumer interest rates. After the Fed's action, interest rates on 30-year fixed-rate mortgages dropped below 5 percent, a remarkably low level. Given rates this low, the flood of loan applications isn't expected to ease up any time soon.
Homeowners who want to refinance are well-advised to be patient and persistent. Shop around for a lender who can meet your needs. Ask questions about the lender's ability to close your new loan in a timely fashion. Stay in touch with your loan officer and be prepared to pick up the telephone periodically if you haven't received an update on the progress of your loan application.