Delays in the Mortgage Process

Common Reasons For Delays In The Mortgage Process

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers the delays in the mortgage process on home loans. Delays in the mortgage process often happen if the mortgage loan application is improperly structured. Loan officers not properly qualifying and issuing pre-approvals is becoming a major problem in many areas where the housing market is booming.  The housing market is booming throughout the nation. The housing market is hotter than before the coronavirus outbreak hit the United States. Dale Elenteny of Gustan Cho Associates explains today’s housing markets and the reasons for delays in the mortgage process as follows:

Mortgage rates are at historic highs surpassing the 7% mark. Mortgage rates on a 30-year fixed-rate mortgage are now over 7.0% for prime borrowers. Never in the history of the U.S. has lenders been so busy as they are now. Everyone, from support staff to licensed loan officers at Gustan Cho Associates, works 12-plus hour days, including weekends and holidays, due to the overwhelming mortgage loan applications.

Many lenders have stopped altogether taking any more new loan applications due to the overwhelming capacity in volume. Many borrowers are not getting timely return phone calls and correspondence, which is frustrating. Home mortgages normally took less than 30 days to close and now have been extended to 45 to 60-day closings. Many mortgage companies take over 70 days to close a home loan. There are floods of mortgage loan applications and insufficient personnel to process these loans. Lenders are having a historic business boom like never before in history.

The Impact Of The Economy Due To The Coronavirus Outbreak

The coronavirus pandemic hit the United States like a category V hurricane. The whole country shut down. The severity of the economic shutdown was up to the governors of each state. The COVID-19 outbreak started in Hunan, China, and spread worldwide. The world economy was in shambles. Over 50 million Americans applied for unemployment. President Trump and his administration approved the coronavirus economic stimulus package in multiple phases.

The Dow Jones Industrial Averages tanked from a February 2020 high of 29,000 to a low of under 18,000 in weeks. Many experts feared another Great Recession and housing meltdown much worse than the 2008 financial crisis. However, due to the fast actions of President Trump and his administration, the economy is better now than it was before the coronavirus outbreak

The housing market is booming. The Central Bank has increased interest rates to control inflation and the volatile economy. Days of rates being at zero percent are long gone. Never in history were interest rates zero. Mortgage rates were at historic record lows just over a year ago. Today’s 30-year fixed-rate mortgage for prime borrowers is 6.96%. 15-year fixed-rate mortgages are now under 6.50%. All indications and data indicate mortgage rates will increase in the coming weeks and months.

Delays In The Mortgage Process Due To Changes In The Mortgage Industry

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The coronavirus pandemic outbreak in the U.S. turned the mortgage markets upside down. Lenders panicked due to the secondary mortgage bond market. Investors in the secondary mortgage bond markets halted buying mortgages from lower credit score borrowers.

Investors considered any mortgages with credit scores under 700  FICO junk and had no appetite. Due to the sudden change in investors’ risk tolerance, most lenders increased minimum credit score requirements on FHA, VA, USDA, and Conventional loans.

Thousands of borrowers who were pre-approved with lower than 680 credit scores were left with a pre-approval letter that was null and void. It is tough but not impossible to get qualified for a mortgage with a lender with no lender overlays.

The Mortgage Markets of Non-QM Loans

Non-QM loans were halted until further notice. Non-QM home mortgages were among the most popular loan programs before the coronavirus pandemic. Bank statement loans for self-employed borrowers were one of the most popular loan programs at Gustan Cho Associates.

Gustan Cho Associates recently re-launched non-QM loans and the 12-month bank statement loan program for self-employed borrowers with no income tax returns. The great news is that lenders with no lender overlays still exist. Gustan Cho Associates is one of the few national mortgage companies with no lender overlay.

Gustan Cho Associates has zero lender overlays on government and conventional loans during the coronavirus pandemic crisis. However, delays in the mortgage process are expected due to the exploding demand from borrowers with lower credit scores and seeking a lender with no overlays. The average loan closing 30 days from processing to closing was 45 to 60 days. Often delays in the mortgage process were up to 90 days. However, as time passes, the turnaround times are getting better.

Delays In The Mortgage Process Due To The Skyrocketing Loan Applications

The housing market was booming despite over 50 million Americans filing unemployment claims and a 10% unemployment rate. At the height of the coronavirus scare. The Dow Jones Industrial Averages went from 18,000 to 29,000,  and today is at an all-time historical record high. More and more Americans returned to work.

Despite historically high rates and out-of-control inflation, the mortgage industry has never been as busy as it has been.  Countless mortgage lenders have stopped taking new mortgage loan applications due to the explosive volume of borrowers applying. Mortgage companies like Gustan Cho Associates are flooded with new purchases and refinance loan applications. Our support and licensed personnel work 12 hours a day, seven days a week, and on holidays.

Gustan Cho Associates is not suspending any new mortgage loan applications. Everyone from processors, underwriters, closers, loan officers, and senior management works 80-hour weeks. Delays in the mortgage process will be the norm for the next few months until the mortgage industry stabilizes. There is no sign of any mortgage rate increase in the next few years. The economy is booming despite the coronavirus pandemic. The housing and mortgage markets are booming and expected to do so in the coming months into 2024.

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