All-time low mortgage rates, coupled with belief that the economy is finally recovering, have caused an increase in the demand for home loans and refinancings. In fact, there been so much of a surge that banks are having a problem processing the paperwork in a timely manner, causing a log jam.
But instead of hiring more staffers, mortgage bankers are using the situation to add to their profit margins.
In the end, home buyers and refinancers are waiting way longer than they should be!
Demand might be up. That does not mean the lenders really have the money to lend. They also do not want to bring on staff and then see the demand fall back.
With this housing market there is little benefit to rushing to expand.
Additionally, this may not be a long term issue. As housing prices increase, the demand from investors, wholesales and property flippers will slow down. Financial institutions are slow to respond until they can see a long-term corporate benefit rather than a short-term help for a typical consumer.
The banks are looking to prevent mortgages on their books from refinancing, so they can benefit from the high coupon rate, or servicing income stream. The banking sector is not very competitive these days and the four large banks control a larger share than ever, so they are able to exert oligopoly control.
In negotiotions you always have to understand what the other person needs. You are looking from your vantage point. You have to put yourself in the place of the mortgage broker. What would you do?
It is possible because every lender in the country is overwhelmed with business. There are only so many professionals to hire to help process and close loans.
We lost a lot of people in the last few years and once most of them found a decent job I don’t think many of them were willing to risk being unemployed again after the refi boom slows down.