The refi money is still flowing

Filed in archive mortgage news on May 21, 2009

There's one benefit to the still slumping housing market: The government has consistently made moves that have resulted in lower mortgage interest rates.

This means that buyers who qualify for mortgage loans at an interest rate at or slightly below 5 percent — not unusual these days for a 30-year fixed-rate mortgage — will make lower monthly payments.

These low interest rates have sent a horde of existing homeowners back to their mortgage lenders to refinance their mortgage loans.

According to the Mortgage Bankers Association, mortgage loan applications for the week ending May 1 jumped 2 percent from the week prior. It was also up 43.7 percent when compared with the same week one year earlier.

Thing is, it might not be all that easy for homeowners to take advantage of these historically low mortgage interest rates. For one thing, the odds are good that their homes have decreased in value during the last two years, sometimes significantly. For owners who've been in their homes for a short period of time, this may make it impossible to refinance an existing loan. The home may appraise for less than the outstanding loan on it.

Secondly, during the housing crash, mortgage lenders shed their employees at a record pace. According to the U.S. Bureau of Labor Statistics, mortgage brokerage firms slashed 3,900 employees in January alone. This leaves a smaller number of loan officers to handle an ever-growing number of homeowners who want to refinance.

It's a situation that's a bit out of balance: The swing in refinance activity has helped the mortgage industry at a time when it needs all the incoming business it can get. At the same time, the results of the housing slowdown have created an industry that can no longer move quite as quickly as it once did.

If you're interested, then, in refinancing your own home loan, be patient. It might take a while. And if you home has decreased significantly in value and you can't refinance? At least console yourself with the fact that you're not selling. That's when a home that's depreciated rather than appreciated is a real hindrance.