Mortgage process not made to order
Bespoke is a word that generally means to personalize or customize. Although it was a new word to me, it is actually an old English term narrowly used for made to order suits from London tailors.
Apparently the archaic word has had resurgence both here in the United States and in the U.K. with shops, book stores, medical supply houses and even storage boxes suddenly branding themselves bespoke. However, the one area of our lives where you can be guaranteed bespoke will never be spoken is in the mortgage industry where everyone lives by the same rules.
One of the consequences of historic low mortgage rates is a backlog of mortgage applications in most large financial institutions. This backlog has become even more acute with the government sponsored Home Affordable Refinance Program (HARP 2.0) starting in mid-March.
As you may recall, HARP 2.0 is the successor to HARP, which was so complicated and had so many restrictions that only a little more than a million borrowers were helped. HARP 2.0 was designed to benefit borrowers who are underwater on their homes, but are still gainfully employed and have a good credit score.
This was an effort to keep homeowners from opting for a strategic default on their underwater mortgages keeping them in their homes and decreasing the number of foreclosures on the market.
Although there are still processing problems with HARP 2.0, the early results are dramatic, according to the Federal Housing Finance Agency, with 180,000 loans being refinanced through the program in the first quarter. The redesigned program appears to be having more positive results with less homeowners being disqualified because of high loan-to-value ratios.
The downside of HARP’s success is that the refinancing process for all homeowners, whether or not they are applying for a HARP program, is slowing down. In July the Mortgage Bankers Association reported that nearly 80 percent of the mortgage applications were for refinancing with about a quarter of them HARP related.
If you’re applying for a refinance through the HARP program, going to your original lender could help speed up the process since it already has most of your information. But if you’re just doing a straightforward refinance to take advantage of lower rates you might consider applying to local community banks and working through a mortgage broker.
Smaller lending institutions may not be servicing HARP refinances, which could result in a faster turn- around time for all other refinances, as well as new mortgage applications. Also, mortgage brokers can keep track of the application as it passes through untold hands while traveling through the approval process.
Nevertheless, even if all your paper work is ready, be prepared to wait as much as 90 days for a final closing. The large lenders like Wells Fargo, Bank of America and JPMorgan Chase have been adding staff to their underwriting centers and are still running at full capacity, so staying away from those large institutions if possible could be beneficial.
In addition, banks and brokers are recommending to their clients to lock in rates so they at least have a guarantee in the event rates start to inch up.
Maybe choosing to refinance through a community bank is a type of bespoke. Community banks may not actually personalize your loan options, but at least it was an informed choice, and you can pretend it was tailored for you just like your British suit.
