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Lenders are rejecting about 50% of the mortgage loan apps they receive - and taking several weeks longer to process each approved application. What's the hold-up?

After all, we do live in an information age, where on-line mortgage applications are forever touted by lenders as being “fast and easy.”

Well, right now, they’re neither – but there are some timely and topical reasons for that – and growing evidence that the mortgage delays consumers are currently experiencing won’t last forever.

Surely, the delay in mortgage applications, which has grown from about one- or two-weeks to up to two months, was brewed from a complex recipe of low interest rates, government incentives, a toxic lending environment, and a rush to low rates from refinancers and first time homebuyers. Those are all key factors in the delays anxious mortgage customers are enduring.

But some factors weigh heavier than others. First, there is volume. According to the Mortgage Bankers Association index of mortgage applications, home mortgage applications are up 31% in 2009, with the bulk of them from refinancers and first-time homebuyers. These mortgage customers have hit the market in droves in recent weeks, as mortgage rates fell below 5% for the first time in years.

Then there is the recent volatile nature of the nation’s mortgage markets, during the past few weeks, especially. Check out the volatility in mortgage rates in a five-day period during the last week in May – such ups-and-downs in mortgage rates invariably leave borrowers uncertain as to when to get into the market and gives lenders pause in green-lighting mortgage loans.


DATE                           RATE MOVEMENT
May 26, 2009:            + 0.250 percent
May 27, 2009:            + 0.625 percent
May 28, 2009:             - 0.250 percent
May 29, 2009:             - 0.375 percent
June 1, 2009:             + 0.500 percent


Another key factor in application delays – and a welcome change to mortgage reform advocates – is increased due diligence on the part of banks to verify a borrower's credentials thoroughly. No more, “quickie” loans with scant paperwork and a wink toward any inconvenient financial details that might stand in the way of a consumer mortgage. Lenders are being increasingly vigilant in letting mortgage applicants know upfront that they’ll be more fully vetted – and that all data on their applications will be validated. Income verification, for example, in an era of rising unemployment, takes on great influence for mortgage lenders. That’s another reason why mortgage applications are taking, on average, two weeks longer than they did two years ago.

So what can you do to minimize mortgage applications times? First, make sure your paperwork is perfect, so the lender isn’t coming back to you looking for more information or an explanation on data you’ve already given. Also, don’t make a major purchase, like a new car, or open a new credit card. That will trigger changes in your credit score and have lenders reaching for their calculators. Also, don’t move large sums of money around from different bank and investment accounts (if you have to, let your lender know what you’re doing). And, whatever you do, don’t switch jobs, or transfer from a salaried-job to a commissioned post. That could negatively impact your income verification case and further delay, if not jeopardize, your home mortgage.

Past that, mortgage delays shouldn’t last too long. Inevitably, the mortgage markets will calm down and rates will stabilize, as they always have done in the past.

It’s a tough task, but getting a good mortgage these days requires not only good financial practices.

It also requires having the patience of a saint.

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