Trying to Refinance to avoid foreclosure? Here is a local mortgage broker’s opinion.
Written by SellHouseFast on November 17, 2007 – 11:20 pmI received an email from Arie Brown this evening from ProActive Lending Solutions.
As you know the real estate market and mortgage lending has experienced some major changes during 2007, and will continue to see changes in the future as well. I want to share some information with you that I feel is important and I think you will too.
Due to recent market condition changes, many homeowners attempting to sell their home have not been successful. Some homeowners then decided to refinance their current mortgage to avoid the increased payments from their Adjustable Rate Mortgage. Others decided to refinance and update their current home verses buying a different home elsewhere. WOW - They where in for a BIG surprise.
Homeowners who had their property on the market For Sale By Owner or listed on the MLS have found it was almost impossible to secure a refinance. The reason being is that virtually every major lending institution implemented guideline changes and would not refinance a borrower’s mortgage if that borrower’s property was currently for sale, or has been offered for sale within the last 6 months.
The good news is that one of the nation wide lenders has just announced that they will do a refinance for owners who have recently had their properties offered for sale (conditions and limitations due apply).
Hopefully, as the market turmoil settles, we should see more lending institutions ease their standards and start offering more of the common sense-liberal mortgage products again. It usually takes one to lead the pack, and the reset slowly follow.
Posted in Lender, Mortgage, Virginia Market, foreclosure |
November 19th, 2007 at 9:10 am
Arie,
Why weren’t the lenders allowing those who had their houses on the market to refinance? and how long is it taking to process a refinance in today’s market?
November 19th, 2007 at 2:12 pm
Hi Christiane,
Good question. 99.99% of all banks and mortgage brokers sell the loans they originate into the secondary market (Fannie Mae, Freddie Mac, ect…) in order to replenish there funds to make more loans. The secondary market sets underwriting guidelines for which they will purchase these loans. This gives the purchasing entity (Fannie Mae, Freddie Mac, ect…) the assurance that the loans will conform to their purchasing wants, needs, and requirements. They can change the underwriting guidelines as they see fit.
Now, when the market is in the buying mood, the underwriting guidelines start to loosen up and it’s easier to secure a loan. When the market is not in the buying mood, the underwriting guidelines get stiffer.
On top of the underwriting guidelines set by the secondary market, the individual lending institutions can increase their own guidelines over and above the basis to sell those loans on the secondary market. The landing institutions still have a responsibility to insure that that loans they originate are of good quality and a marketable commodity.
Now faced with high foreclosure rates across the country, the lending industry and secondary markets have suffered major looses over the past few years. They have taken the position that making a refinance loan to someone who has their property up for sale, or recently for sale is too risky. Many people, who did refinance their mortgage after an unsuccessful attempt to sell the property, later lost their home to foreclosure.
The time frame they used as a guideline was that your home most not have been offered for sale within the last 6 months. But as I stated, I now have a lending source that will do the refinance if the loan makes sense (conditions and limitations do apply).
The normal time it takes to refinance depends on how well prepared the borrower is to provide the necessary documentation to submit your loan package. It can be from 20 to 45 days.
I hope this answers your question to your satisfaction. Feel free to call me if you would like to discuss this further. God bless.
Respectfully,
Arie Brown
Mortgage Advisor
Virginia Mortgage Services, Inc.
(804) 437-4740
Arie@ProActiveLendingSolutions.com