The number of Americans seeking to lock in record-low interest rates by refinancing their mortgages has skyrocketed, though Long Island mortgage brokers say the crush eased this week as rates increased and residents adjusted to new coronavirus restrictions.
Mortgage lenders were deluged with five time more refinance applications last week than they received in the same period a year ago, the Mortgage Bankers Association reported Wednesday. The numbers reflect the week ending March 13.
"It’s a frenzy right now,” said Robert Moulton, chief executive of the Americana Mortgage Group, Inc., a brokerage in Manhasset. “Consumers are trying to capture the lowest rate…. We're working unprecedented hours, we’re working from early in the morning to late at night to keep up with it.”
A slight respite came as interest rates rose and refinance applications dropped 10% last week compared with the previous week, the Mortgage Bankers Association reported.
The average rate for a 30-year mortgage was 3.65% this week, mortgage giant Freddie Mac reported Thursday. That's up from 3.29% for the week ending March 5, which had been a historic low.
But Long Island mortgage brokers said demand still exceeds lenders’ ability to keep up with applications.
"The banks are not necessarily offering the lower rate because they are so backed up and have so many applications," Moulton said. "That would vary bank to bank, I don’t think there’s a blanket statement."
Moulton said his clients who have 20% down payments and credit scores of at least 720 are getting rates in the mid-3% range.
Borrowers who were unable to get their applications processed when rates were as low as 3.29% may have “lost the window of opportunity” to lock in the lowest rates, due to the rise in borrowing costs since then, said Michelle Abreu, director of counseling at the Long Island Housing Partnership in Hauppauge.
In addition to keeping up with the huge surge in applications, mortgage lenders must also adjust to having many employees work remotely in an effort to prevent the spread of coronavirus, brokers said.
Some borrowers have not been able to get their applications processed due to “huge delays… in every aspect of the business, just because of the volume,” in addition to staffing challenges due to the virus, said Warren Goldberg, president of Mortgage Wealth Advisors in Plainview.
For borrowers facing potential job losses or reduced income due to the coronavirus, “you want to try to cut expenses and maintain some cash reserves, so refinancing could help to accomplish that," Goldberg said. But, he said, in some cases, “no one’s calling them back, there’s only so much bandwidth the industry can handle.”
The sharp drop in mortgage rates was largely due to factors such as investors flocking to buy U.S. Treasuries amid concerns about the economic impact of the coronavirus, said Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association. The boom in Treasuries pushed down bond yields, which typically influence mortgage rates, Kan said.
In this case, lenders did not let mortgage rates fall as quickly as bond yields did, since they were already unable to keep up with the pace of applications, Kan said.
Mortgage lenders must “maintain their pipelines at a manageable pace, so they can only take in a certain number of applications at a time just given their staffing,” he said.
Lenders cannot simply bring on more employees to keep up with the demand, since it takes time to hire and train new workers, Kan said. “It’s not always going to be an easy fix,” he said. But, “if this goes on for more than a few months, I think then it does give lenders time to train and get new hires involved in the process.”