While plenty of money is available through local lending institutions, financing and refinancing are facing stiffer criteria.

Both Bonita Greene, loan officer of Reliance Bank and Tommy Coblentz, city president of Regions Bank, say the days of 100-percent financing have gone away and applicants cannot come in empty-handed with spotty credit scores and expect to walk out with a new lower rate loan.

“There is absolutely mortgage money available,” said Greene. “There is a tightening of loans where there is no documentation—100-percent financing has gone away. People now must have at least 3 percent down. The minimum credit score has gone up. [Loan rates] are different in different situations. I’ve seen them as low on a 30-year fixed as 5 percent.”

Greene said her institution has seen a slowdown, but the drop in the rate has helped and homeowners are coming in for refinancing.

According to a Dec. 4 story in the Wall Street Journal, applications to refinance home mortgages have tripled in recent weeks for the largest increase on record by the Mortgage Bankers Association, which began tracking this data in 1990. The surge is attributed to mortgage rates falling by more than .5 percentage points.

“This is a very good time for home owners with mortgage rates near or above 7 percent to consider a home refinance,” said University of Alabama at Birmingham professor of Real Estate Lary Cowart .

Cowart said owners must meet two crucial criteria before choosing to refinance.

“First, the current mortgage rate should be a full point below what you are currently paying,” he said. “So considering today’s refinancing rate of 5.75, you should be currently paying an interest rate of 6.75 or more to realize any true savings on a refinance.

“Second, you also must be planning to say in your home for at least two years after the refinance to offset the added closing costs connected to refinancing and realize any potential profits from the decision.”

Regions’ Coblentz agrees with Greene in that he is reluctant to quote a set rate because he said there are variables.

“We don’t have set rates,” said Coblentz. “It depends on credit scores, income, the size of the home, the size of the mortgage. It’s just hard to quote a 30-year fixed rate.”

Coblentz said there are several “trains of thought” on the best time to refinance.

“Right now, if you are in an adjustable rate that is due to expire, then it’s time to refinance to a 30-year fixed rate,” he said.



Refinancing without fees



Coblentz said the “best case scenario” for those refinancing is “par” refinancing in which the fees are rolled in.

“This is refinancing without the fees,” he said. “It might be a little bit higher but because the fees are rolled in, you can do it without out-of-pocket expenses. If you are at 7 or 7.5 percent, it’s a great time to do a par refinancing at 6.375 with no fees.”

Coblentz likened the current financial crisis to the “tech bubble” that burst in 2000-2001, only this time it was the housing bubble and it had much more serious consequences.

Harvey Golub, former chairman and CEO of American Express, explained the burst of the bubble in an opinion piece in Monday’s Wall Street Journal:

“Between 1994 and the second quarter of 2008, the U.S. housing stock more than doubled in value from $7.6 trillion to $19.4 trillion. Almost three quarters of that increase was due to a speculative bubble, the root cause of which was government policies designed to increase home ownership, largely among people who would be considered nonprime borrowers…. The effect of all this meddling was compounded by the lax or incompetent supervision of Fannie Mae and Freddie Mac. All in all, the government got into the business of encouraging and then forcing lending institutions to make mortgage loans to people who could not pay them back.”



‘Still lending money’



“We’re still lending money every day,” said Coblentz. “But a word of advice: Help banks out. Be prepared and have your information ready. People with good credit and not borrowing 100 percent of value, we’re lending money to them all the time.”