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Mortgage lenders eager to help traditional borrowers

By Eileen Ambrose, columnist for The Baltimore Sun, a Tribune Co. newspaper

January 20, 2008

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Remember trying to refinance during the real estate boom? You were lucky if your broker or lender returned your calls within two weeks.

How that has changed since the bust of the subprime market last year.

Traditional borrowers -- meaning those with good credit, not too much debt and enough equity in the home -- are in the driver's seat now.

"You can find yourself in a situation where mortgage lenders or brokers are climbing over each other" to get your business, said Frank Nothaft, chief economist with mortgage giant Freddie Mac.

Refinancing has recently ticked up as interest rates have ticked down. If you're thinking about trading in your old mortgage for a new one, you likely can count on better service. Some mortgage experts suggest you might even have enough leverage to have fees waived or even negotiate a slightly lower interest rate.

Profit margins

"The question is whether ... profit margins are cut so thin that they aren't able to do it," said David Pulford Jr., president of the Maryland Mortgage Bankers Association. "It doesn't hurt to ask."

This is a major shift from just a few years ago, when the mortgage market was booming. Brokers and lenders weren't about to spend time haggling with you when a long line of other borrowers was waiting, said Keith Gumbinger, vice president of HSH Associates, a provider of mortgage information.

Gumbinger said 40 percent of the business back then came from subprime borrowers and others who, for one reason or another, didn't quite qualify as a prime borrower. That business has dried up. And lenders and brokers, some of whom entered the market during the boom time, are left to compete for the traditional borrowers that remain.

"Those borrowers are the key to survival today for many firms," Gumbinger said.

Attentive service

Eileen Fitzpatrick, a spokeswoman with Freddie Mac, has experienced the difference between refinancing then and now.

When she refinanced in 2003, the process took up to two months.

"You really had to stay on the lender. You had to keep calling and following up. They were so overwhelmed," she said.

She refinanced again about two months ago, partly to tap the equity in her home to refurbish a kitchen. This time it took less than a month, and the lender waived a fee.

"When they saw our credit score, they were just over the moon," she said.

Her lender was much more attentive this time.

"I started getting annoyed with him constantly calling me with updates," Fitzpatrick said.

She said she wanted to tell him, "Just let me know when I can have my money."

This is not to say you have to be fiscally perfect to refinance. Many subprime borrowers are refinancing into Federal Housing Administration loans that don't require stellar credit.

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