Speeding Up Refinances
The New York Times. (July 1, 2012) By Betsy Vereckey
MANY large financial institutions are facing backlogs of mortgage applications as more homeowners take advantage of low interest rates and the government-sponsored Home Affordable Refinance Program ®, or HARP ®. Borrowers looking to accelerate the process are finding some relief from brokerages and community banks that are not servicing HARP ® loans.
We've heard stories about 60-day to 90-day loan waiting periods in some cases,'' said Michael Fratantoni, the vice president for research and economics of the Mortgage Bankers Association, adding that larger banks are ''running at full capacity. According to the Mortgage Bankers Association weekly survey released Wednesday, nearly 80 percent of the mortgage applications were for refinancing; previous weeks' surveys showed roughly a quarter of the transactions were HARP ®-related. HARP ® was created by the federal government to simplify the refinances of homeowners with mortgages owned or guaranteed by Fannie Mae and Freddie Mac, who seek less onerous loan terms. The program was expanded last fall as HARP ® 2.0.
HARP ® borrowers typically refinance with the banks that originally serviced their loans, because those banks already have their information, Mr. Fratantoni said, and ''there's potential for it to be a less painful process. Still, tighter lending standards precipitated by the mortgage crisis have made for an arduous application process. Andrew Latos, a real estate lawyer in Astoria, Queens, who has represented clients in transactions with big banks and who worked with a broker to service his own home loan, says he charges more for closings these days, because ''a two-hour closing can quickly become a five- or six-hour closing.
Mortgage brokers, for their part, are reporting an increase in business from those looking to streamline the entire process. We have direct contact with the banks, so we always know what's going on with your file,'' said Vanessa Thatcher, a senior loan officer with Atlantic Home Capital in Ronkonkoma, N.Y., explaining that a broker can keep track of the application as it ''goes through so many hands'' at a large financial institution. Ms. Thatcher charges a fee of 1 to 2 percent of the total loan amount.
Brokers can also act as financial consultants. ''A good percentage of the people who call me to refinance, I tell them not to,'' said Mark Yecies, the president of SunQuest Funding in Cranford, N.J. He recalled a borrower who recently came to see him after being told he was a prime candidate for a refinance. Mr. Yecies ran the numbers and found that a refinance didn't make sense, because the majority of the borrower's payment was principal.
Borrowers might also want to consider refinancing with a community bank. New York Community Bank, for example, does not service HARP ®-eligible borrowers and is able to respond faster to non-HARP ® refinance requests, said Stephen Trayte, a senior vice president and director of residential credit for the NYCB Mortgage Company, a subsidiary of New York Community Bank. But even his bank has been experiencing delays because of higher volume. He recommended that borrowers lock in a rate.
Normally, we do the whole transaction in less than 30 days,'' said Mr. Trayte, estimating that the average time has reached 45 days. ''There is about a 50 percent delay just because of the volume of activity, and that's without having HARP ® transactions. To handle increased demand, big banks like Wells Fargo, Bank of America and JPMorgan Chase have been adding staff members and underwriting centers. Wells Fargo recorded a 31 percent jump in HARP ® volume after implementing HARP ® 2.0, said Vickee J. Adams, a spokeswoman. She estimates that it takes 90 days to complete a refinance. Borrowers will have a better chance of moving through the process in less time, she said, if they ''follow the necessary steps to complete their applications and submit supporting documents in a timely fashion.