October 25, 2011 (Jeff Alan)
Significant delays in mortgage approvals are causing a backlog in home purchase closings with approval times that are normally around 30 days being stretched to 45 to 60 days according to the latest Campbell/Inside Mortgage Finance HousingPulse survey.
Real estate agents report that in some areas, up to half of the home purchase closings have been affected. Lenders have incurred heavier workloads due to a surge in refinance applications and complications from appraisals on distressed properties which has led to the longer closing timelines.
Damage to foreclosed properties often prevents uncontested or simple appraisals and mortgage origination pre-approvals on short sale properties sometimes lapse before all parties have agreed to the transaction.
A real estate agent in Mississippi commented, “Per other agents in the office, approximately 45-50% of transactions are delayed due to mortgage application timelines. And the issue seems to be getting worse.”
Another agent in California complained that almost 70 percent of the distressed property closings in their area had been delayed because of loan conditions.
In California, real estate agents now have to contend with a new law prohibiting forced deficiency notes on short sales which has made second lien holders slow to negotiate on short sale transactions leading one agent to say the problems are getting worse.
“With the new California law 458, seconds are not willing to settle. Mortgage application timelines run out for the buyers waiting to receive acceptance, counter or declination.”
The Distressed Property Index (DPI), the total proportion of distressed properties on the housing market, declined to 44.4 percent in September, down from 45.9 percent in August.
Tags: Campbell/Inside, Mortgage Finance HousingPulse, mortgage approvals, home purchase backlog, real estate agents, distressed properties, foreclosures, short sales
Campbell/Inside Mortgage Finance