American Banker (03/03/08) P. 1; Berry, Kate
Refinancing applications soared in January, leading some mortgage lenders to hope for a refi boom that would resuscitate their first-quarter results. While experts predicted additional jumps in refi requests after the Federal Reserve made an emergency cut to the federal-funds rate on Jan. 22, applications fell dramatically in February. With many borrowers who did not expect to get approved submitting applications anyway and lenders finding it difficult to handle the volume of activity due to reductions in back-office staff, bottlenecks occurred. According to HSH Associates vice president Keith Gumbinger, "Back-end systems are impaired right now, and to jam all those loans into a funnel that can't manage them means loans won't get funded." Additionally, a refinance boom never occurred due to many applications being rejected under new lending requirements from Fannie Mae and Freddie Mac that reduced the necessary loan-to-value ratio and bolstered minimum credit scores.
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