Mortgage rates have hit a wall and probably aren’t going lower. So will they go higher next year? As is said, when something can’t continue, it won’t.
So we’ll see.
There are numerous, and complex, reasons for the difference. More volume, for example, is moving through an industry that has shrunk significantly. At the same time, banks today are scrutinizing property appraisals and loan files more closely—requiring reams of documentation of borrowers’ assets, to guard against the cost that they will be forced to buy back any defaulted mortgages from Fannie and Freddie. That means fewer underwriters are spending more time on every loan.
As a result, at a time when there are fewer people processing loans—mortgage banking employment has fallen by more than 50% from its peak in 2006—the amount of time it takes to process loans has gone up. Loan underwriters processed around 60 retail applications per month last year, compared to 190 applications per month in 2002, according to the Mortgage Bankers Association.
“The Federal Reserve is sitting there opening up the spigot as much as they can, and then you have someone at the other end of the hose squeezing it tighter and tighter, and a trickle gets through,” said Christopher Mayer, a Columbia Business School economist.