Homeowners’ refinancing grows elusive

Homeowners’ refinancing grows elusive
By Mary Ellen Podmolik
Chicago Tribune
CHICAGO» The lowest mortgage interest rates in decades have sent thousands of homeowners eager to refinance their home loans scurrying into lenders’ offices. Many leave empty-handed and upset.
A multipronged whammy of lower home values, new appraisal guidelines and tighter lending requirements frequently derail consumers from snaring loans at lower interest rates. Lenders say they are closing 60 percent to 70 percent of refinancings.
“It’s a blow to (a borrower’s) ego,” said Todd Gosden, a loan originator at Avenue Mortgage in Naperville, Ill. “The guy who makes $250,000 a year, managing 150 people, who says, ‘I want to take advantage of this,’ and I have to say, ‘You can’t.’ The reaction is, ‘Are you kidding me?’ ”
A decade ago, all types of consumers were able to qualify for a particular interest rate. In the current era of risk-based pricing, numerous variables determine the rate offered to an individual, including whether the property is a single-family home or condominium, and loan-level pricing adjustments are applied to eight tiers of credit scores.
“There are more people that can’t get a refinance today than two to three years ago,” said Brad Blackwell, an executive vice president at Wells Fargo.
A case in point is a couple who six months ago easily refinanced the $365,000 interest-only loan on their $900,000 home, said David Hochberg, president of Townstone Financial Inc. in Chicago. Hochberg said the man’s credit score was 790; hers was 715.
But since the last refinancing, credit guidelines have tightened, and the minimum score now required for a new loan at the rate they sought was 720. The only option, which the couple rejected, would have been for the wife to remove her name, and thus her score, from the mortgage application.
Self-employed borrowers face extra challenges because they have to produce two years of tax returns. If the owner of a sole proprietorship has a lot of tax write-offs that alter adjusted gross income, or the most recent year shows a substantial income decline, it can hurt his or her application.