March 28th, 2020 11:06 AM by Jackie A. Graves
rates remain low by historical standards, but volatility in the market means
rates are fluctuating significantly. So prospective borrowers looking for a
home loan need to shop carefully for the best rate, since it could change
markedly in a short period, not unlike airline tickets back when folks were
also need to expect delays, as bottlenecks in the process are slowing down the
ability of lenders – as well as borrowers themselves – to close loans as fast
as they usually do.
weeks ago we saw rates really drop, and things were already busy before that,”
says Joel Kahn, associate vice president of economic and industry forecasting
at the Mortgage Bankers Association.
lenders are continuing to feel the squeeze, as low and volatile rates draw tons
of would-be buyers and refinancers to the market. That’s creating issues with
at lenders was already tight,” says Kahn. And with the influx of new customers,
lenders are struggling to keep up. “It’s an issue of finding the staff they
need, onboarding them, and it’s a long and technical process to get new
employees up to speed.”
is so brisk, some lenders are even raising
their mortgage rates in order to discourage new business,
despite the Federal Reserve lowering its lending rates to zero percent. In
addition, lenders have also been pulling
back because of disruptions in the mortgage-backed securities market where they
buy and sell the bonds that back mortgages.
It’s not just lenders slowing the process
all this, the coronavirus and the government’s responses to it are crimping the
ability of all sides of the market to close loans. The closure of many
municipal and county offices across the nation is slowing or altogether
stopping mortgage loans from being closed, creating bottlenecks.
if an office is open, it may have few people on site, says Kahn.
“A lot of
closing has traditionally been done in person, so the lack of personnel is
slowing the process,” says Kahn. He suggests that remote online notarization,
already pushed by industry for some time, may be able to pick up some slack
here and mitigate the bottleneck somewhat.
may also be slowing the process, too, through no fault of their own. In
response to the coronavirus, many employers have employees working from home,
may temporarily be understaffed or otherwise unable to verify an employee’s
income. So, many borrowers may not receive a timely verification, which is
needed in the underwriting process.
the process, the Federal Housing Finance Agency (FHFA) is allowing lenders to
obtain an email verification of the borrower’s employment, a year-to-date pay stub
or a bank statement with a recent payroll deposit, in lieu of verbal
can be another bottleneck, Kahn says, because there was already a shortage of
them over the last year before rates plummeted in 2020 and spiked an interest in
surrounding the coronavirus are also hurting the appraisal process.
might be concerned about letting an appraiser into the house,” says Kahn. “And
some appraisers are reluctant to go into a house without knowing the situation
to deal with some of the problems caused by the appraisal process, the FHFA has
instructed Fannie Mae and Freddie Mac to accept “appraisal alternatives” to
inspecting the interior of a home, though without specifying what those were.
adds up to a longer time to close for borrowers. Lenders are extending their
rate locks from 30 days or 60 days out to as much as 90 days. In some cases,
borrowers might be asking for the extended lock due to the ability to obtain
necessary information, for example, but in other cases lenders just don’t have
the capacity to close more quickly.
What can borrowers do?
bump in refinances has been a silver lining, but it’s a challenging time all
the way around,” says Kahn.
challenges mean borrowers need to set their expectations correctly when they
enter the mortgage process. They shouldn’t expect to close on the loan as
quickly as they might have in years past, as multiple factors – many of which
are beyond their control – combine to slow the process.
course, this slowdown may cause
further backups in the entire market, too. As the closing process
comes to a crawl, it can have knock-on effects down the line, because home
sellers are often homebuyers at the same time. Sellers who are unable to close
in a timely fashion on a mortgage may have to defer the sale of their own home,
for example, causing a domino effect.
these constraints, borrowers need to approach the process with some patience,
which is perhaps not the easiest thing to do when you spot a mortgage rate that
could save you tens of thousands of dollars over the life of your loan and you
want to secure it.
buyers can use any slowness in the market as time to shop around for
the best mortgage rates, potentially scoring an even better deal by
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