According to a survey conducted by Washington-based Campbell Communications, roughly 33% of home purchase closings originated by mortgage brokers in August were canceled.
The survey of 1,744 mortgage brokers took place during the week of August 23-31, with its creators finding “quantitative measures of the major disruptions in the mortgage originations market which started in early August.”
The survey found that home purchases were most frequently canceled for homeowners with subprime credit, but noted that prime borrowers were affected by recent credit tightening as well.
Only 21% of homebuyers seeking prime conforming mortgages had canceled closings in August, compared to 56% of subprime homebuyers, though both numbers are much higher than a previous survey taken in 2004 in which only 4% of closings were canceled for mortgage-related reasons.
Refinances were also a major problem for homeowners, with a startling 57% of brokers’ customers finding they were unable to refinance their adjustable rate mortgages.
This is becoming a bit of an epidemic as resetting interest rates begin to take their toll on borrowers’ checkbooks.
Both the conforming group and the subprime group had separate reasons to blame for failing to successfully refinance resetting loans.
“Subprime homeowners most commonly had issues with subprime loan programs no longer being offered and FICO scores. Those seeking prime conforming mortgages most commonly found appraised property values and loan-to-value (LTV) ratios as impediments,” said Thomas Popik, a designer of the survey.
“Sixty-four percent of subprime homeowners could not refinance, while fifty percent of homeowners seeking prime conforming mortgages could not refinance.”
The survey also found mortgage broker production had slipped significantly from year-ago levels, with August 2007 production of prime conforming loans down nearly 20%, and Alt-A loan production down roughly 50%.
Business seems to be drying up on the wholesale end, and the little business that is kicking around faces a series of increasingly difficult hurdles en route to funding.