Looking to refi? "Be Cynical About the Refinance Process"

The New York Times’ Jennifer Saranow Schultz writes about the refinance process.

“As least until recently, we’ve been in the midst of a refinancing boom. So consumers applying for refinancings should at least expect some delays.

“While lenders are leery about releasing details about how long refinancings are taking to close today versus a year ago, some are willing to admit that processing times are longer today for a number of reasons, including regulatory changes and historically low rates.”

I’m not sure of the “refinance boom” since most home values in New Jersey fell dramatically over the past two years.

“Kris Yamamoto, a spokeswoman for Bank of America, said in an e-mail that the longer processing times are the result of the “dramatic changes” the mortgage environment has undergone in recent years, including “new underwriting standards being enforced and regulatory changes enacted” to ensure that consumers can safely afford their mortgages. She also pointed to the low rates.”

How about the family that can afford its current mortgage but wishes to take advantage of a lower rate? Unless you had 30% equity, or more, in your home when you took your last mortgage, you can pretty much forget about it since home values have fallen as much as that number. Lenders will not make 100% loan to value mortgages despite encouragement by the Federal government.

So, what to do when you apply and you find your loan application dragging? Some lenders, after already locking the interest rate for 90 days are extending the rate longer if the delay can be found on the bank side. My suggestion—when the lender asks for a document, send it immediately, retain proof of delivery, for example, the fax transmission report or FedEx delivery receipt, and keep in touch with your processor in writing.

Read the full Times story including two cautionary accounts posted by other readers.

What do you think about this issue?

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