Mortgage Lenders Report Rise In Number Of Refinancing Applications Following Announcement of $800 Billion Bailout

November 27, 2008 6:17 a.m. EST

Washington, D.C. (AHN) - The Tuesday announcement by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke of an $800 billion package designed to help consumers obtain loans and refinance their home mortgages have stirred troubled homeowners into action.

Mortgage companies were deluged by requests for refinancing. However, for the $200 billion consumer loan side of the package, it may take some time before the announcement translates into action, according to bankers.

On Tuesday, right after the Fed and Treasury announcement of the $600-billion mortgage package, Internet lender Quicken Loans got $400 million worth of mortgage applications, over four times the volume of loans it receives daily. The company's loan officers had to work past midnight to finish the paperwork, disclosed Bob Walters of Quicken.At Prosperity Mortgage, loan adviser Jennifer Du Plessis recounts a large volume of phone calls and emails were received by the firm from interested homeowners.

Following the announcement, interest rates on 30-year fixed-rate mortgage went down one-fourth of a percentage point to 5.76 percent Wednesday. It is the lowest since early February.

But action will not be as swift in the consumer loan segment of the bailout package. Joe Belew, president of the Consumer Bankers Association, estimates it may take months before credit card and small business loans may become available to ordinary Americans.

Even the mortgage package may not significantly cover a large portion of homeowners who need assistance. One hitch is that some of the homes owned by people with good credit ratings may have declined in value and it will make refinancing difficult.

The impact of lower mortgage rates is less when unemployment continues to go up and wages are left behind, Findlay said.