The home loan industry is buffeted by a major gale and so is in many areas the residential real estate business. They are right now battling the elements as they best can. While at it, mortgage lenders have made scores of adjustments out of necessity to their loan programs and business practices.
One of the adjustments is causing extra strain on homeowners and investors who are looking to refinance their properties. Now is as good a time as ever to find a more affordable product as the existing interest rate is about to reset upward and mortgage money can be had under 6%. No argument there. But many banks have placed limits on those plans if the home currently is, or has recently been, on the market for sale.
The thinking is that if an owner has tried to sell but couldn't and then he completes a refi, he's still likely to pursue the sale. And should he then manage to unload the property and the spanking new mortgage is paid off, that pretty much wipes out all the lender's profit. And banksunderstandably don't like that.
This so-called days-off-market policy actually dates back several years and has been largely ignored up until now when the financial turmoil has given it a fresh start. In general sellers are prohibited from refinancing within a certain time period after the property has been on the market, the range normally being between three and 12 months. Some lenders are implementing it and some aren't, so it isn't universal at all. It is, however, gradually gaining in popularity in the hard-squeezed industry.
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Provided by:
Esko Kiuru
Mortgage, real estate and apartment industry analyst
www.BluefoxToday.com - syndicated mortgage, housing and property management blog
eskokiuru@gmail.com
My cell: 702-499-1006
Esko
There is obstacles everywhere
Tommy
Thanks for your post.
This year will be filled with challenges and wins. It is up to folks like us to turn those challenges into wins. Like everything, this will not last forever.
Happy Selling!
Tony Grego - Indiana Mortgage Broker
Esko, we have always had a standing rule that we will not refinance a house that has been on the market within the past 6 months.
Also the new Fannie Mae and Freddie Mac guidelines on refinancing are making it tougher to refinance.
As an underwriter I looked to the appraisal for this data. If the appraiser stated that the property was currently listed the loan was dead, if it was recently listed we needed a written explanation telling us why is was taken off the market. The guideline for the waiting period is different based on the program. I think you will find stiffer rules for no-owner properties. The best advice I can give is be pro active, get letters of explanation. don't let the UW discover the issue, help them understand it.
I had two stacks on my desk - in one stack were files that had problems or unresolved questions, the other stack had no issues. guess which ones I scrutinized more.
With the current market this might not be the last time you have this issue.
Tom,
It seems that way.
Tony,
Once the current mortgage turmoil subsides, this rule will again fade.
George,
The rules vary widely, some banks don't even have any limits.
Lee,
National lenders tend to be stricter on this issue.