What will the banks do?
2010 was the year of the refinance. Interest rates were at historic lows and banks were in the process of adjusting to the real estate downturn. In the normal real-estate world banks would prioritize purchases over refinances. In 2010 banks became so overwhelmed with the flood of refinances that they started to ignore purchases. Was this a calculated move? I do not think so. It appears that banks were understaffed and unable to respond quickly enough to the surge in business. The standard 30 day close became 45 days and the certainty of a purchase being funded was drawn into question. Federal loan guidelines kept changing and the understaffed banks were not able to respond effectively. A lender would approve a loan and then at the last minute deny it. Most active mortgage brokers and realtors have nightmare stories of lender mistakes. Change is coming, the refinance flood has slowed to a trickle. Interest rates have increased enough to deter refinances yet remain low enough to encourage purchases. Banks will have to refocus on purchase loans . Loan standards will loosen to allow more buyers into the market. 2011 will be the year of the home purchase. The economy has improved enough to allow home buyers to confidently enter the market. "Times they are a changing", mostly for the better.