Refi Rejections A ‘Serious Warning’

Nearly half of all refinance applications are being rejected, according to the New York Federal Reserve Board.

At a 45.7% rejection rate, it is one of the highest rejection rates on record, the New York Fed said. And the reasons are plentiful, says Michael Haltman of Hallmark Abstract Service, a title insurer in the Empire State.

In a recent post, Haltman said the spike is more than worrisome, it is “a serious warning sign” of the financial pressures families are feeling every day.

The Hallmark CEO outlined five “unfiltered truths” behind the jump in rejections:

• Debt-to-income ratios are “blowing up,” he wrote. “Credit cards, car loans, insurance premiums all feed into DTIs, and lenders are tightening the screws.”
• Credit scores are slipping. Late payments on consumer debt are up, and just one late payment can push the borrower over the line from approved to rejected.
• Home equity isn’t growing as rapidly as it used to. The less equity people have in their homes, the “higher the perceived risk,” Haltman said.
• Employment isn’t as stable. Less overtime, inconsistent commissions, more volatility when it comes to self-employment. Lenders notice it all.
• Property taxes and insurance premiums are surging. Higher carrying costs “push DTIs beyond lender limits.”

Halman says his post isn’t to cause panic, but rather, to caution real estate and mortgage professionals. “Just one more canary in the economic coal mine, quietly chirping before the rest of the market hears the warning,” he wrote.

Today, he cautions, “the details matter more than ever.”