August 15, 2014 by 1 Comment

In an effort to save money, many consumers have turned to a mortgage refinance as an option. Working with a mortgage company or bank, a borrower can significantly reduce his payments by taking advantage of low interest rates. However, with today’s stricter lending laws, many mortgage holders are finding refinancing isn’t quite as easy as speaking to a loan officer. In fact, one in every two mortgage refinance applications are currently being denied, according to the Mortgage Bankers Association.

Despite those statistics, it can still be extremely discouraging to be personally denied the opportunity to refinance. When that happens, homeowners may think the opportunity has passed. Consumers do have other avenues to explore, including simply waiting until more equity has accrued in their homes. These other options may provide more immediate alternatives when a homeowner is denied.

Go Local

Big banks face tight restrictions from corporate office, with loan officers likely to be questioned over the number of loans being approved. In this type of environment, officers usually have less flexibility, which means they can’t employ personal judgment when approving a loan. If a borrower doesn’t meet set-in-stone criteria, the application will be denied.

Many small local banks and community credit unions don’t operate with the same strict list of rules and regulations. Even in those locations that do, an on-site manager can individually approve a loan that might otherwise be disapproved. Since local banks have a commitment to personalizing the experience to each customer, a homeowner may find that these locations provide a more workable solution to refinancing in the current lending environment.

Clean Your Credit

If the lender denied your application due to your credit score, you can take measures to clean it up. Unfortunately, this process requires patience, since it takes time to see results. However, you can start immediately and begin to see progress within a few weeks. First you’ll need a copy of your credit report, which will be supplied to you for free since your application for credit was denied.

Once you have a copy of your credit report, you should examine it carefully for any errors. Often consumers find creditors haven’t reported that a past-due invoice was paid in full or information was reported under the wrong name. If you find errors, prepare and send a letter to the credit bureaus listing them and asking that they be removed. Include any documentation you have on the issue, including canceled checks or letters from the creditor. The credit reporting agency will conduct an investigation to determine the validity of the information and remove it from your credit report if so.

If you’ve been denied for a refinance request, these options provide an alternative. If possible, learn as much as possible about the reasons behind the denial and take measures to correct those. Additionally, don’t take a “no” from one lender as an indication that refinancing is out of the question. With so many lenders and refinancing programs, homeowners can easily find the perfect program to fit their individual circumstances.

Are you looking to refinance your current mortgage?  Rates are close to the lows of the year, and you may be able to lock in a low rate for many years to come. Call us today to get a free rate quote or to speak with one of our licensed mortgage professionals.  

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1 Comment

  •' Vicki says:

    I came across your blog, and many of the home owners don’t understand why a lender would not cooperate with refinancing, when the outcome is possible default by the borrower. I have the answer. It is in their best interest, as default is the most profitable due to the creation of derivatives in the mid 1990s, and the repeal of the Glass-Steagall Act of 1933 in 1998.
    A derivative (also known as Credit Default Swaps, this is what Hedge Funds manage) is an insurance policy on an asset portfolio, like mortgages, that insures the asset for the full value of the asset at the time the loan was originated. The financial industry has made year over year record profits because they invested in the derivatives, and then either sold the Mortgage Backed Securities on Wall Street or Leveraged (borrowed) against them at the Federal Reserve. When created, the Federal Reserve investigated derivatives and found them to be a huge potential threat to our economy, but the financial industry successfully lobbied the Fed (Greenspan & Bernanke) and Congress to keep them unregulated. The next move for the financial industry was to successfully lobby the Congress & Executive Branch (Presidential Economic Advisor Larry Summers & Clinton) in 1998 to get the repeal of the Glass-Steagall Act of 1933. The critical protection for homeowners in Glass-Steagall was that Commercial banks were prohibited from putting their assets on Wall Street with Investment banks. Commercial banks played the crucial role in the current Great Recession, as buyers and sellers of mortgage-backed securities, credit-default swaps and other explosive financial derivatives. The Glass-Steagall Act of 1933 was created to protect American citizens from the Wall Street activity that created the 1929 crash and subsequent Great Depression. Without the repeal of Glass-Steagall, the banks would have been barred from most of these activities. Despite the minor reforms of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2012, as of 2014, there has been no regulation of Derivatives or reinstatement of the protection measures that were in the Glass-Steagall Act. Also, this is why some homeowners can not get investor cooperation to short sell their homes. My advice to home owners, BEFORE trying to refinance or do a short sale, is to ask their loan servicers ( who are not usually the investor) if the loans are insured on the back end. As party to the contract (note) they legally can not be denied this information by a loan servicer or investor. If the answer is yes, on any note on the property, then the investor will not agree to anything that impacts their derivative profits. Sadly, what is truly needed is aggressive financial reform at the federal level, which is impossible as long as The Legislative and Executive branches of government are allowed to profit in any way, i.e., contributions to political parties & candidates in elections, personal investments, and the insider trading laws that they are exempt from. It truly is extreme corruption.

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