Small lenders and brokers looking good

It seems that everyone is talking about the Wall Street Journal article on refinances, along with some numbers released by Freddie Mac showing that on average, borrowers that refinanced during the first quarter of 2012 reduced their first-year interest payments by $2,900. And according to Moody’s, refinancing over the past three years has unlocked savings worth $46 billion in their first year. That certainly has to help our GDP, right?

But it isn’t easy to refinance. We all know that fewer banks control a larger share of the mortgage market than they did before the financial crisis. And on the retail side it now takes the nation’s biggest mortgage lenders an average of more than 70 days to complete a refinance, according to Accenture Credit Services, up from 45 days a year ago. Documentation and appraisal requirements have increased. And the spread between the primary market and the secondary market has widened out for a variety of reasons (to slow volume, to cover increased overhead, and to increase buyback reserves quickly come to mind – Fannie asked banks to buy back $24 billion last year) as many lenders have boosted their rates to borrowers. In general, what this has tended to do, per the WSJ, is to help smaller, more nimble mortgage lenders with faster turn times. On the retail side, with Wells and Citi at about a 90 day processing time, and Chase at 45-60 days, it is making smaller lenders and brokers look pretty darned good.