The Washington Times posted a series of home mortgage refinancing articles online this week. Henry Savage, the president of PMC Mortgage in Alexandria, Virginia tracked the low mortgage rates for the last few weeks and reported on the significance of the low rates and the tightened mortgage refinancing guidelines.  Savage writes, “Despite the credit crunch that still persists, many homeowners are eligible for a fixed mortgage refinance and should help them take advantage of the best mortgage refinance rates that we’ve seen in decades.” He notes the yield on the 10-year Treasury bill is 2.93 % and that is lowest it has been since 1965, so maybe it’s no surprise that Freddie Mac reported last week the lowest average mortgage rates since they started recording rates in a weekly report.  With the trend of record breaking mortgage refinance rates you would think that more people would have taken advantage of refinance opportunities but home mortgage refinancing is not as easy as it used to be.  

We outlined below a few examples of refinance guideline changes that make the need for home mortgage refinancing help for evident as the loan process has become more difficult.

1. Home Value Code of Conduct took effect in the summer of 2009. HVCC prevents mortgage lenders from communicating with an appraiser. This new guideline addendum was created to keep refinance lenders from attempting to influence appraisers to reach a specific number for the home value estimate that sets the lending parameters for the “Loan to Value” criteria.  Appraisers have to support their opinion of value through real comparable sales and value adjustments that are accepted in the industry. 

Gone are the days when a loan officer or processor could call an appraiser to pull up some recent comparable sales to help us understand if the home value and LTV were in line with the lender requirements to get the refinance loan approved.  Honestly, loan professionals would use this step to justify whether or not a specific home value was probable. In most cases, borrowers are no required to pay COD to an appraiser who may not be familiar with the area and unfairly assess the home’s value and eliminating a significant opportunity for a homeowner to reduce their interest rate and lock into a more affordable fixed rate mortgage.  Don’t even get me started about the borrower throwing their money in trash for an appraisal that only supported them not qualifying for a best home refinance loan opportunity they will see in their lifetime. See Bryan Dornan’s article last week posted on the Nationwide Lenders Blog > Mortgage Loan of a Lifetime.

2. The 4506 is a form that was used by most mortgage lenders in an effort to nip mortgage fraud before the refinance loan closes. The 4506 enables lenders to obtain an applicant’s tax return information directly from the IRS. You see, it wasn’t too long ago that unscrupulous loan officers or loan applicants themselves would doctor up their financial documents to help improve their qualifications.  The 4506 was used by mortgage loan companies’ years ago but it was only exercised randomly for quality-control purposes as lenders were reselling the loans in bulk to banks. Today, most refinance lenders pull a 4506 on all of their loan applicants’ returns, regardless, but this step slows down the refinance process and often puts the borrower’s rate lock in jeopardy. Borrowers that want to maximize today’s low mortgage refinance rates need to be prepared to document their income, because stated income home loans are not available and the 4506 will show the lenders and banks exactly what the you are submitting to the IRS for the last few years. 

3. Most refinance lenders are requesting a recent telephone or utility bill to verify identity. Lenders want to make sure you are using your owner occupied home for refinancing.  The guidelines for refinancing second homes and investment properties are very different from primary residence home loans.  Savage jokes about the fact that the photo copy of the driver’s license, all pages of the last few months of bank statements and W-2s are not enough for most lenders to be comfortable extending an approval for home refinancing. 

Clearly the documentation requirement for homeowners to qualify for home mortgage refinancing has become time consuming and burdensome to say the least.  The question you loan shoppers need to ask yourself prior to jumping into another refinance – Is it worth it? 

Answer these questions below before getting tangled up in a refinance web that leads to a denial or a loan that could be extending the term of your home loan 5-10 years.

> How much will you save by refinancing? > Can you document your income for the last few years? > Will your income demonstrate to the underwriter that you have the ability to make your mortgage payment every month? > How is your credit?

Remember that there is more to the refinance process than just working hard to compare mortgage refinance quotes from lending companies.  You need good advice on your specific situation and mortgage refinancing help from an experienced loan professional without going broke in the process.  If all else fails and you are turned down for a refinance loan, you may qualify for a loan modification plan that lowers your monthly payment and essentially accomplishes the same goal.  See the Washington Times article >