The processing timetables on VA streamline loans continue to see delays and the estimated wait time is now over 10 weeks. Veteran homeowners need to understand the delays and change their expectations on when the loan will be processed and closed.
LowVARates.com recently visited with a VP of one of the largest title companies in the nation and they acknowledged the wait times. The VP of the title company had recently visited with Bank of America (one of their largest clients) and they are pushing AT LEAST 120 days from the start to finish for a refinance.
Why are the wait times delayed?
There are many factors that have caused the delays we are currently seeing with refinances, but let’s focus on 3 of the major contributors:
1) Interest rates are historically low. Thousands of people are trying to refinance
2) There are fewer banks and lenders to handle a lot of loans
3) U.S. bailout loans (HARP) are creating hundreds to thousands of new applicants
Let’s go into a little more detail about each of these reasons for causing major delays in the processing timetables.
Interest Rates are Historically Low
The interest rates for a VA 30 year fixed loan have hovered around 3.75% for a significant amount of time. These are the lowest interest rates we have seen in the history of the VA home loan. Because the interest rates are so low, everyone wants to ensure they lower their rate and save hundreds to thousands of dollars. Just 10 years ago the interest rates were in the 6-9% range! With the economic crash, home loan interest rates have basically been cut in half creating a mass rush to refinance.
Just like at the grocery store, if you have 1 person before you in the checkout line you will wait a couple minutes. If you have 50 people in front of you the wait is going to be SIGNIFICANTLY longer. The same concept applies with processing loans.
Less Banks and Lenders to handle loans
We all know the economy has taken a huge hit in the past 4-5 years. During this time period over 250 banks and lenders have gone out of business. This is a HUGE amount of lenders leaving the business and forcing the other survivors to absorb the customers of the folded banks and lenders.
One of the major problems is many of the lenders that stayed in business took on additional customers but have not hired additional staff members to match the customer increase.
Another big blow came when Wells Fargo recently announced they have discontinued wholesale loans and GMAC declared bankruptcy. These were 2 of the largest lenders in the nation and now other banks and lenders will have to absorb even more traffic.
What do you get when you have a significant increase in customers and no increase in staff? DELAYS.
Without going into too much detail about the recently passed HARP loans by President Obama, these U.S. bailout loans are allowing people who typically could not qualify for a refinance now qualify. This has created thousands of new applicants looking to refinance their loan and adds to the processing delays.
A lender in TX recently told LowVARates.com that they hired 6,500 new staff members to help them get their HARP loans processed! HARP loans are giving people a chance to refinance their loans, but also contributing to the major delay times.
What to expect?
The point of this post is NOT to scare people away from refinancing their VA home loan. Now is the best time in the VA loan history to lower you interest rate! LowVARates.com wants our veteran homeowners to understand that the loan process is going to take longer than you have previously expected. Our goal is to educate our customer base so they know what to expect and understand the process can be delayed.
We have found that once our customers understand the VA streamline process is going to take much longer than expected, both parties are happy. The good news about the VA streamline delays is that the interest rates are still EXTREMELY low.
Remember, this blog is not intended to scare homeowners away from refinancing their home loan, but help all of us to readjust our thinking and processing expectations.
To learn more about this check out our YouTube video about processing delays.