The Federal Reserve’s move to increase its purchases of mortgage- backed securities is expected to drive rates below 5 percent, but consumers wanting to refinance may have a tough time taking advantage of it, according to local mortgage lenders.
One issue is the capacity of lending institutions to handle the volume. Another is a lack of credit lines, making it difficult for mortgage originators to get qualified borrowers the loans they want.
“There have been a lot of borrowers on the fence waiting to see whether it would be appropriate to refinance,” said Pete Lansing, president of Universal Lending, one of Denver’s largest independent mortgage providers. “It’s like asking to get your windshield repaired after a hailstorm. The repair shops can’t get to you as fast as you’d like them to.”
The Fed also committed to buying long-term bonds, a move that could also drive down long-term interest rates.
But just as consumers borrow the money to buy a home, mortgage lenders borrow the money they bring to the closing table until the mortgage is securitized and sold to investors.
“If the industry can’t do short-term financing because the banking system itself is blocked, then it’s promising something that can’t be achieved,” Lansing said.
Mike Oswald, a mortgage broker with American Home Funding, said he’s been doing loans with interest rates below 5 percent for some time and he’s got lenders in place to handle the demand.
“I hope this gets people off the fence,” he said. “I hope people finally wake up and take advantage of it.”
Other lenders said they have been swamped with refinances and purchases, especially since the announcement of an $8,000 tax credit for first-time buyers, which was included in the economic stimulus bill.
“I’ve been getting purchase contracts like crazy the last two weeks,” said Liana Pomeroy, a certified mortgage-planning specialist with Cherry Creek Mortgage Co. “A lot of my purchase business is first-time buyers.”
Terry Jones, president of the Colorado Mortgage Lenders Association, said there already has been a rush on refinances over the past two or three months, and the Fed’s move will keep the trend alive.
“There are potential bottlenecks from the volume the industry is already coping with,” Jones said. “The entire lending industry is probably running up against its capacity in terms of the ability to process loans.”
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com
