May 19th, 2020 12:47 PM by Jackie A. Graves, President
Heather Morris wanted to pull some cash from her Georgia home to
pay for renovations, and she was eager to take advantage of rock-bottom mortgage rates. But when her
lender told her in March that it could take six months to process her
refinancing, Morris wasn’t hopeful.
“I didn’t think it was going to happen,” Morris recalls.
She persevered, and Morris’ refinance with Navy Federal Credit
Union closed in mid-May. In addition to a longer-than-normal wait, Morris
experienced other oddities — such as donning a mask and staying inside her
house while a masked notary stood on her front porch. They passed documents
back and forth through the front door. “Doing the paperwork was different,”
As Morris saw firsthand, the mortgage industry is coping with a
one-two punch that has complicated the process of refinancing. First, a drop in
rates in March led to an avalanche of
applications. Then the coronavirus pandemic disrupted long-established
processes for guiding refinances through the lending system.
As a result, a refinancing process that once required just three
or four weeks now can drag on for eight or nine weeks.
“The clients understand what’s happening, and they’re dealing
with it,” says Joe Rodriguez, vice president of residential lending at
Provident Bank in Jersey City, New Jersey.
In March, mortgage rates fell to historic lows. That led to a
flood of applications from homeowners looking to lower their rates, or to take
advantage of equity gains delivered by a decade of rising home values. “The
whole industry got slammed in March with new applications,” Rodriguez says.
Inevitably, all those new applications created backlogs. “Our
volume went up 400 percent,” says Kevin Parker, vice president at Navy Federal
Credit Union. “Imagine anyone having 400 percent more work.”
Navy Federal has been warning borrowers like Morris that the
process could take up to six months, although Parker says it rarely drags on
Approving a mortgage is a complicated process, one that requires
a lender to validate a borrower’s income, check the value of the home being
used as collateral and scrutinize the title history of the property.
Just as refinancing applications picked up, the coronavirus
pandemic dramatically changed the way everyone in the mortgage industry works.
Loan officers no longer go to the office. Appraisers stopped
walking through houses. And no one gathers around the title company’s closing table.
“We had to figure out how to deal with the virus and still do
business,” Rodriguez says. “The process is a little slower because everybody’s
working from home right now. Things that would take an hour to do are taking a
For instance, Rodriguez and Parker both say it’s harder to verify
a borrower’s employment. A task once dispatched with a quick call to the
borrower’s human resources department now means leaving a voicemail and waiting
a day or two for a response.
The combination of large volumes of applications and the
coronavirus’ curveball means loan processors must be meticulously organized,
says Ed Conarchy, a mortgage adviser at Cherry Creek Mortgage Co. in Gurnee,
Illinois. “Any trip-up in meeting those important milestones and the refi
process can unravel,” Conarchy says.
Meanwhile, homeowners looking to refinance may have to get in
line behind buyers who need a mortgage so they can close on a house.
The mortgage industry
already had been digitizing, and lenders quickly adapted to many changes. One stumbling
block, though, is that most lenders still require some documents to be signed
in the presence of a legal witness and notarized — “wet ink” signatures, in
That was what led Heather Morris to put on a mask and pass
papers to the notary on her front porch. Morris’ elderly mother was staying
with her, and she didn’t want to take a chance by letting someone into the
Outdoor signings have become something like the new normal, says
Navy Federal’s Parker. “We’re seeing settlements being done in driveways, or on
And sometimes, documents are being signed remotely. Jim
Campagna, founder of SnapFi, a mortgage lender in San Jose, California, says he
pulled off his state’s first remote online notarization in early May.
California requires notaries to personally witness the signing
of documents, but the state has relaxed those rules a bit during the pandemic. That
led to Campagna’s client, a Silicon Valley homeowner, signing documents while a
notary in Virginia looked on by videoconference. To prove his identity, the
borrower held up a driver’s license to his computer’s camera.
Campagna hopes remote online notarization grows more common, and
allows for refinancing to complete its transformation to an all-digital
“The majority of our other documents have been digitized for
some time,” Campagna says. “So what’s really been holding back the transaction
is the notarization process.”
Here are a few ways you can make the refi process as smooth as
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