Dear Liz: Why does a request to lower the interest on an existing mortgage require a new appraisal, inspection, title search, etc., when the home is the same? Think how much money could be put back into the economy with a simple keystroke.
Answer: The short and obvious answer is that “nothing is the same.”
Home prices are down 33% from their 2006 peak, with even bigger drops in many areas. Lending standards are dramatically tighter as well. When your loan was originally made, lenders might not have cared much if your home’s size or amenities were fudged, or if the wrong “comparable properties” were used to arrive at your home’s value, or if you made the income or had the assets you claimed. Now they care, deeply, about all of those things.
Even if the world hasn’t changed, your property may have. Deferred maintenance could have reduced its value, while improvements may have increased it. Lawsuits or other problems may have popped up that affect the title.
And when you think about it for a moment, you’ll realize that all those loans that were made so easily in the past — with simply a few keystrokes — are what helped lead to the economic mess we’re in today. Yes, the pendulum may have swung too far and made refinancing unnecessarily tough, but the old easy lending standards were simply unsustainable.