Refinance Bait and Switch

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Do you know how we all got excited about those super low mortgage rates? Well, it turns out, they are not that exciting because most homeowners are not able to lock them into their loans.

Homeowners have found that when they go to apply for refinances, they are being quoted higher rates than those 0–1% numbers we all got worked up over. It seems lenders are not able to offer these bargain prices because they have too many applications to process, and the secondary market that buys securities on mortgages is frozen with not enough liquidity.

You see, your mortgage is not just secured by the bank that gives it to you. There is a market behind it that buys and sells the debts, and if that market is frozen, that effects lenders.

Also, the banks are too overwhelmed. You can apply for a refinance, but even if you go forward with it, you are still weeks away from locking in a rate. You’ll have to produce a boatload of documents along with a home inspection. And what if that business shuts down for the foreseeable future? There is no guarantee of a new loan or a low rate in a world where there is no guarantee of anything.

Still, it can’t hurt to try, and a lot of people are. According to the Mortgage Bankers Association, refinance applications are up 479.2% from this same time last year.

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