 Newspapers, television, magazines, and virtually all news outlets are crammed with headlines boasting historically low interest rates. But what they don't tell you is that it's nearly impossible to qualify for these rates (even with good credit) and people are being turned down in record numbers. And if you're expecting to refinance your mortgage, expect to be turned down, especially if you're refinancing an adjustable rate mortgage (ARM). "I'm turning away about 60% to 75% of the clients who come to me for a refi," said Bob Moulton, president of Americana Mortgage Group of New York. This statistic is pervasive throughout the mortgage industry, as every lender is tightening their standards. Unlike lending practices during the housing boom, where nearly anyone could qualify for a loan, obtaining or financing a loan in today's market is near impossible. Let's consider a prime example. My father, an insurance business owner with a six figure salary and a very high credit score, was recently turned away by Washington Mutual when attempting to refinance his condo in Florida. His application was rejected because his credit report showed a late payment on a cell phone bill 3 years ago (note: the late payment penalty was my brother's, who has the same name). My father, who has been paying 2 mortgages with WaMu on-time for over twenty years, was baffled by his application's rejection. If he cannot qualify for refinancing, who can? Many people are finding themselves in this same situation. As more ARMs are expected to reset within the next few months, many are rushing to refinance at lower interests rates. According to MBA's application index, application volume jumped 22% in January with refinancing accounting for 73% of all applications. But most are being turned away as housing prices drop and leave little to no equity on the home. Consider that in some areas like Miami, home prices have fallen 15% in the past year, wiping out three-quarters of the equity. Lenders, who want collateral that is worth more than the value of the loan, are cautious about refinancing. If the lender has to foreclose and resell the home, they are looking at a substantial loss. The bottom line, under the circumstances, lower interest rates are helping few and far between. (Written by: K. Skowronski)
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