By Chris Taylor
NEW YORK Oct 13 For Scott Laperruque, every day
is Groundhog Day.
That's because the commercial photographer from Short Hills,
New Jersey is refinancing his house for a rate of 4 percent.
Trying to, anyway. And every time he wakes up, just like Bill
Murray in that classic film, he discovers he's living the same
day all over again.
"The bank will ask for one document, and a week will go by,"
says Laperruque, 55, who now pays 5.75 percent and would save
almost $400 a month if his refinancing would close. But the bank
keeps asking for more, and more, and then because they have to
have everything within a 30-day period, they have to re-ask for
things like payroll stubs.
"It's a constant round robin of new documents and expiring
documents, all at the same time, and it's been going on for
months. I'm about to blow my stack," he says. "The only
conclusion I can come to is that everyone at the bank is making
money by kicking around my application. The longer they keep it
up, the longer they keep their jobs. I just don't know."
Sound familiar? If you're one of those who were involved in
the $858 billion in refis for 2011, or the more than $1 trillion
estimated for this year, it probably does. The constant news
that mortgage rates are hovering near record lows - the current
average for a 30-year fixed loan is 3.44 percent, according to
Bankrate.com -- has brought out legions of homeowners, who have
been trying to secure new loans and reduce their monthly nut.
But if you assume that refis are a relative breeze, you're
wrong. They're treated exactly the same as an entirely new loan,
and contain all the challenges that come with that. First of
all, lenders are swamped with applications, meaning the pipeline
has gotten pretty clogged. Second, banks are still cautious in
the wake of the subprime mortgage bust that saw so many
homeowners unable to make payments.
"It's definitely become a much more rigorous process," says
Michael Fratantoni, vice president of research for the Mortgage
Bankers Association. "There are multiple checks of every data
point along the way, all of which needs to be fully documented
and verified. Everyone should be aware that lenders have become
After you deluge banks with the necessary documents, they
still come back with an endless series of questions. Missed a
bill payment because it was stashed in a drawer? Be prepared to
explain yourself. Your parents sent you a check for your
birthday? Have that fact notarized, please.
There's also the nagging question of whether your lender
really wants to refi at all. If your current bank has you locked
in at 6 percent, say, why would they ever want to give you 3.5
percent? It would seem that the more they drag the process out,
the more interest they collect at the old, higher rate.
"It's a good question, and a lot of homeowners wonder about
that," says Polyana da Costa, senior mortgage analyst for
financial information site Bankrate.com. "But in fact they do
want to refinance your loan, because they make money on it all
sorts of ways - like collecting origination fees, underwriting
fees, and then by selling that mortgage to Fannie Mae or Freddie
Mac. If they seem like they're dragging their feet, it's
probably just because they're totally overwhelmed right now."
TROUBLE AT THE CONDO
Whatever the reasoning, it's left Scott Laperruque twiddling
his thumbs in refi purgatory since May. And that's for a
single-family home (with a separate living area for his
mother-in-law), which used to be relatively straightforward.
When you're part of a building with multiple owners, like a
co-op or condo, the number of problematic issues can
Just ask Brooklyn's Val Vinokur. He's a 40-year-old
associate professor of literary studies at The New School,
looking to convert his 30-year fixed mortgage of 5.75 percent to
a 15-year-fixed at a rock-bottom 3 percent. He and his wife have
solid jobs, good credit, and plenty of equity in the apartment.
Simple, right? Not so much. So far Vinokur, who was born in
Moscow in 1972 before immigrating to the United States seven
years later, likens the refinancing process to the novels of
surrealist Franz Kafka ("The Trial") or Arthur Koestler, author
of anti-totalitarian works like "Darkness At Noon."
"It all hinges on getting the financials from the co-op,
which seems to be taking forever," says Vinokur. "The mortgage
broker doesn't like the management company, and vice versa. I
haven't pulled my hair out yet, but I anticipate reaching that
point. But then I'm Soviet, so I have a pretty high tolerance
for bureaucratic nonsense."
THE BIG TEASE
Even when the bank seems locked and loaded to give you a new
loan, the process can still get derailed and leave you
emotionally spent. That's what happened to Amrita Barth, 38, a
Brooklyn lawyer and mom of two. She and her husband bought a
home in the Greenwood Heights neighborhood almost three years
ago, got a mortgage at 5.5 percent, and subsequently put in a
host of new upgrades.
When they tried to refinance at 4.5 percent in the fall of
2011, they got waylaid at the appraiser stage a couple of months
into the process. "It was extremely frustrating," says Barth.
"He spent five minutes in a four-story house, and appraised it
for less than we bought it at, despite $200,000 in renovations.
So the bank said we'd have to put in even more cash to get the
same rate, and we had to drop the idea."
Adding insult to injury, Barth had already spent a lot
prepping for the refi, including paying the appraiser almost
$1,000 for his rock-bottom valuation. Once it fell through, that
was money she was not getting back.
Lucky for her, interest rates kept falling. So when the
couple decided to take another stab at a refi this summer, they
got 4 percent - and a higher appraisal. They just closed on the
deal, but still feel like they've been through the wringer.
"It's been so annoying," she says. "And it's very hard not
to take it all personally."
Money is an emotional subject, so it's no wonder refi
applicants are getting so stressed out. "It's like a big tease,"
says Maggie Baker, a Philadelphia psychologist and author of
"Crazy About Money." "You put up with the whole process and have
such high hopes, and then in the final moments you might be told
you're just not good enough. So it can be very frustrating, and
there's a big potential for disappointment."
As for Scott Laperruque, he keeps waiting for the day when
the refi is approved, the new interest rate kicks in, and his
monthly payment drops. But that day still has not arrived.
"It's a never-ending process," he sighs. "I want it to end -
but it just won't."