Mortgage Application Process “Confusing,” Borrowers Report, As Regulators Plan Additional Changes

By Kyle Chezum Updated on 2/8/2011

2/08/11

Most home buyers say securing a mortgage is one of the most difficult and complex parts of the home purchase process, a study conducted by Move, Inc., concluded.  Above all else, applying for and qualifying for a mortgage was described as “challenging,” “hard,” and “difficult to follow.”

Constant changes in underwriting standards and lender practices were cited as the source of much of this confusion.  Just 7% of buyers found it hard to get a mortgage primarily due to credit requirements, though.  A full 23% cited the aforementioned unpredictable documentation requirements as a major cause of difficulty.

Massive, fundamental change will likely continue as the standard practice for the next year or more at least.  Financial regulators have until April to finalize newer, tighter lending standards that will impact all residential mortgage providers.  These changes haven’t hit the books in most areas.  In addition, the White House plans to raise borrowing costs on mortgages backed by the Federal Housing Administration.

There are major changes in the works for Fannie and Freddie as well.  The White House is expected to release details on a plan to reduce government housing support to 50% over time.  Currently, Fannie and Freddie handle over 85% of all residential mortgages.

The survey conducted by Move, Inc., asked homebuyers what issues they felt should be top priority for the government.  Opinions were divided.  Nearly a third of respondents felt the government should focus on keeping the market stable for new buyers by repressing interest rates.  Another third felt the government should extend more assistance to underwater homeowners.

Buyer opinion was unified on the need for clarity and standardization in the mortgage application process, if nothing else.  The coming months will likely bring more change in the name of eventual conformity.  Time will tell.