Abstract:
In many cases, mortgage refinance applications can take 90 days to process. But many lenders will not lock in a rate for longer than 60 days. The problems occur when the process exceeds 60 days, leaving the consumer without the desired rate, their refinance fee, and sometimes the loan.

[Stephen LaDue] and lenders like Thomas Kuranda, president of Kuranda Financial in Wayne, Pa., are finding that customer complaints are rising with the delays in the loan process.

David Beadle, a Milford, Mass.-based lender, agreed that the mortgage banking machine has been gummed up by these two key processes: "It can take up to 30 days to get an appraisal. It can take up to a month or more to get a loan approved by an underwriter, and another month for the title examiners to clear the title to the property at the county registry of deeds or at the town recorder's office."

Full Text:
Copyright SAN DIEGO UNION TRIBUNE PUBLISHING COMPANY Nov 3, 2002

NEW YORK -- Homeowners hoping to take advantage of rock-bottom mortgage rates to refinance their homes may be in for a rude awakening.

With so many people lined up at mortgage banking offices, the approval process has slowed down so much that some borrowers are finding that the low rates they thought they had locked in don't exist anymore.

Loan demand has soared as mortgage rates fall to historic lows, crimping the banking industry's ability to deliver rates promised by interest rate agreements that lock in the rate and can cost as much as 1 percent of the loan amount.

Lenders cannot process all of the applications on time, much less provide all borrowers with the promised mortgage rate.

In many cases, mortgage refinance applications can take 90 days to process. But many lenders will not lock in a rate for longer than 60 days. The problems occur when the process exceeds 60 days, leaving the consumer without the desired rate, their refinance fee, and sometimes the loan.

"What happens is people lose their rate. They want to get the loan closed. Consumers are complaining," said Stephen LaDue, head of Wauwatosa, Wis.-based Affiliated Mortgage Corp. "It has burned too many people because rates have continued in a low range for a long time."

LaDue and lenders like Thomas Kuranda, president of Kuranda Financial in Wayne, Pa., are finding that customer complaints are rising with the delays in the loan process.

Kuranda said borrowers who come to his company usually have been declined by another lender, or they find that the lender is not delivering the promised rate.

While much of the mortgage lending industry has been automated because of technology, two key elements of mortgage banking still require hands-on attention: property appraisal and making sure the property is clear of any liens.

Lenders require a lien search because they want to make sure a borrower who puts his or her home up as collateral has not used the home as collateral for other loans.

Also, a property's value needs to be evaluated by an appraiser before a mortgage loan is OK'd. Without such an appraisal, lenders cannot calculate how big a loan they can sign off on.

The number of appraisers that are available to help process a mortgage loan is limited because federal law requires that these specialists are licensed.

"There is an unlimited number of deals pending and there is a limited number of appraisers. Everybody is backed up," said LaDue, adding "the title issue is key. You cannot close (a loan) without a clear title."

"The appraisers I work with are seeing four times more volume and the title company is seeing twice the usual amount of volume from me. They may have to turn my business away," said Kuranda.

David Beadle, a Milford, Mass.-based lender, agreed that the mortgage banking machine has been gummed up by these two key processes: "It can take up to a month of more to get a loan approved by an underwriter, and another month for the title examiners to clear the title to the property at the county registry of deeds or at the town recorder's office."

But consumers do have recourse, Beadle said.

In some cases, "failure of the borrowers to close within the 60-day period does not relieve the lender of the obligation to honor the (rate) lock," he said.

Consumers can also dodge mortgage lenders with poor business practices by doing a little homework such as checking with state regulators on a firm's complaint record, he said.

Credit: REUTERS

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