Academic

On the eve of the closing for my refinancing, I notice this from the W$J:

Interest rates on fixed-rate mortgage loans for prime borrowers have fallen to below 5%, the lowest level since the 1950s, triggering a wave of mortgage-loan inquiries from borrowers eager to refinance. But lenders and mortgage companies say that as many as half of the people who want to refinance can't meet the credit hurdles and won't get approved.

My friend and mortgage broker told me that he has been swamped with inquiries, and he seemed surprisingly grateful to get our credit scores (both around 820) and the appraisal (down only about 3% from our purchase price less than two years ago). Now I understand why:

Only about a third of U.S. mortgage debt outstanding is likely to qualify for refinancing, said Doug Duncan, chief economist of Fannie Mae. Nearly 70% of borrowers don't make the cut, he said, most often because their credit isn't good enough or they don't have sufficient home equity. A significant number of homeowners owe more than the current value of their homes, a situation sometimes known as being "under water." Others can't profitably refinance, often because they hold jumbo mortgages, those above the $625,000 limit for loans that can be bought or guaranteed by Fannie Mae or Freddie Mac  in the highest-cost areas.

I reiterate that I am not an expert in mortgages, but I suspect a lot of people are frustrated by the incongruity of being unable to lower their monthly mortgage payments on account of the fact that they have bad credit. Wouldn't their creditworthiness improve if they got the new loan?

Yeah, I know it's not that simple, but still ...