Credit Problems Hindering Mortgage Refinancing
ByThe mortgage refinance application volume dropped significantly last week. It appears the pool of eligible borrowers for home refinancing has been shrinking significantly as mortgage lenders continue to tighten their loan guidelines leaving no solutions for borrowers with bad credit . According to a report from CNBC, many insiders were surprised by MBA’s report this morning on weekly home refinancing applications report from the Mortgage Bankers Association.
Even as the 30-year fixed mortgage rates are available at 4.75%, refinancing fell dramatically last week for the first time in a month, down 14.25%. Michael Fratantoni writes, “Despite the historically low mortgage rates, many homeowners have already refinanced recently, remain underwater on their mortgages, have uncertain job situations, or have damaged credit following this downturn, and therefore may not qualify to refinance.” Fratantoni underscores the problem most borrowers have with the lack of home equity being the driving force for not qualifying to refinance. For homeowners who have good credit but owe more on their mortgage than their home is worth, they may be eligible to refinance under the government’s Home Affordable Refinance Program. This refinance loan allows conforming mortgages to be refinanced up to 125% loan to value.
The issue of bad credit refinancing is a biggest reason most borrowers can’t approved for a home refinance loan. If you were late on a mortgage payment, you won’t qualify for the FHA refinance program. That is why so many homeowners are seeking loan modification plans. Many homeowners also suffer from credit card debt that usually brings down the credit scores. The lack of refinancing while interest rates are at record lows underlines the major problems in mortgage lending in 2010. It also suggests that the government involvement in the housing crisis may have its repercussions.
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