Record-low rates clog loan pipelines, delay closings

With record-low interest rates, more homeowners have been looking at refinancing their mortgages to trim their monthly payments. But they’re finding that they may have a lot longer to wait to refinance than in the past.

“Clogged mortgage pipelines have created headaches for hundreds of thousands of Americans trying to take advantage of low mortgage rates,” The Wall Street Journal reports.

The nation’s largest lenders reportedly are taking an average of more than 70 days to complete refinancing applications – that’s up from 45 days a year prior, according to Accenture Credit Services.

The clog in refinancing is mostly due to a surge in requests, particularly coming from the revamped Home Affordable Refinance Program, which has removed some common roadblocks for underwater home owners who want to refinance. HAMP applications account for one-third of refinance applications, according to the Mortgage Bankers Association.

Also causing refinance delays, lenders are being much more cautious about who they make new loans to. What’s more, the number of mortgage brokers has decreased significantly in the last few years. Mortgage brokers now account for fewer than 10 percent of originations compared to 31 percent in 2005.

“You have more loans going through a pipeline that is too small,” Terry Moore, global managing director of Accenture Credit Services, told The Wall Street Journal.

Coupled with that, “amid reduced competition, some large lenders have boosted their rates in a bid to hold down volumes while bolstering profits,” The Wall Street Journal reports. “That limits the savings for many applicants.”