Are apartments good investments?

San Diego County market relatively healthy, spurred by returnees from Riverside, wariness to buy

 Written by Roger Showley

Nov. 15, 2011

Ocean Village apartments in Oceanside were one of the largest and most recent multifamily projects to change hands in the third quarter, CoStar Group reported. The sale price on the 33-unit project, including retail space, was $11.75 million. The project was originally built as condos but is expected to be handled as a rental for the time being, said the buyers, MG Property Group. — CoStar Group

San Diego County's apartment market is looking up for investors for next year, analysts say.

They point to rising demand, falling vacancies, higher rents and more projects in the pipeline.

"The apartment market is going to be very strong," said Russ Valone, president of MarketPointe Realty Advisors. "There's a lot of demand out there because people are shy about the for-sale marketplace today."

He said younger renters want to be flexible in case job prospects draw them away. Young families are interested in renting foreclosed houses and townhomes rather than buy as they normally would in their late-20s and early-30s. And former owners are settling into apartments.

Valone said some of the increasing demand derives from people who moved to Riverside and Imperial counties for affordable housing and commuted to work in San Diego. Many are renting back in the county to be closer to work.

"So you've seen a repatriation of a lot of households who had left the county for housing but continued to be employed in the county," he said.

Vacancies have not reached the low 2-3 percent range seen in the mid-2000s, since so many singles doubled up or moved back home with relatives. But the present vacancy rate of 4.5 percent is considered a healthy one, as measured in a survey in September of more than 117,800 units in 803 projects.

Economists generally say a 5 percent vacancy rate represents a desirable balance point between supply and demand.

Looking to supply trends, Valone said the number of apartment projects is likely to increase next year after a three-year slump. Only three projects with 185 units are under construction now but seven with 1,051 units have received their final go-ahead and 26 with 5,091 units have received tentative approval.

"We'll see increased supply in the marketplace," he said.

The Construction Industry Research Board in Burbank reported that through September, the number of multifamily units authorized locally was 2,329, more than double the 1,022 approved for the same period last year. That indicates many more new apartments are likely to be available in coming months.

By contrast, single-family homes were virtually unchanged for the same period, 1,744 in 2010 and 1,742 this year.

For existing owners, refinancing of their rental projects has loosened up with money available from Fannie Mae and Freddie Mac, the two government-sponsored enterprises that stumbled in the secondary for-sale market three years ago.

According to real estate attorney, Gordon Gerson, who advises clients seeking financing, both companies are on tap to complete more than $40 billion in multifamily financing and refinancing. Owners previously relied much more on commercial mortgage-backed securities offered by commercial lenders.

"This is a good thing because it means the capital markets have opened the gates of funding in the area of multifamily housing," Gerson said. 

Refinancing means owners can free up capital with lower rates and look for more investment opportunities. They also will not face the need to raise rates on tenants as much, since their cost of borrowing will be lower -- "all of which is good for the economy," he said.

Alejandro Lombrozo, a broker at Cushman & Wakefield, said institutional-grade deals, involving 100 or more units, have drawn many potential buyers. He cited one recent example, Woodbend Shadowridge, a 240-unit project in Vista, that sold for $44.3 million last month -- $185,000 per unit. 

"That had a lot of interest," Lombrozo said, "over 30 tours at the property and close to 20 offers."

He said 10 such sales are expected to close this year, about the same as last year and about what 2012 will bring. But he said things could slow down if interest rates rise significantly or Freddie Mac and Fannie Mae pull back on lending. 

But he said other lenders, particularly life insurance companies, are showing greater interest in San Diego apartments. 

For tenants, the current market has meant rising rents.

Valone said his latest survey showed that the average monthly rent surpassed the previous record, set in September 2008, to reach $1,364 in this past September survey. That represents a 1.3 percent increase since the March survey and 2.2 percent year-over-year. 

The highest rent was $1,719 in downtown San Diego, ahead of the submarket leader in the North County Coastal market, where the average was $1,697.

Gerson said rents are rising partly in reaction to the relatively better economy San Diego than in other markets. 

"As employment increases, you have an increase in rents," he said. But he said they are not rising as fast as in the San Francisco Bay area.

"Not only the Silicon Valley but in other suburbs of San Francisco are doing very well," he said.

Source: SignOnSanDiego

Apartments Will Continue With Modest Growth

By Natalie Dolce

November 11, 2011

Nadji says companies won't expand until at least 2013

ENCINO, CA- On a recent apartment webcast, 57% of participants predict that renter demand will get stronger in 2012, while 2% says it will be weaker, with 40% saying it will stay the same. The 2012 Apartment Market Outlook Video Webcast was put on by Marcus & Millichap Real Estate Investment Services, and was generally optimistic in the sector’s “continuation of modest growth in 2012.”

According to William Hughes, managing director of Marcus & Millichap Capital Corp., from a lenders standpoint, the improving apartment fundamentals have supported their level of confidence in the marketplace. “It has been easy to finance core assets all the way down to C assets across the board,” he said. “It becomes a little choppy as you move into tertiary and smaller assets, but even those are being financed by local and regional banks.”

Capital supply, he said, will remain healthy, but not for every asset. Agency lenders will continue to be Fannie Mae and Freddie Mac, life companies, regional and local banks, debt funds, and CMBS, he says.

Hughes pointed out that debt and equity markets for the first half of the year will resemble the last half of 2011—pointing to the choppy domestic economy such as slowly improving employment numbers; inconsistent economic indices; and the election; as well as global influences like foreign sovereign debt and economic geopolitical uncertainty.

Hughes says that investor strategies will be: maturing overleveraged properties—extensions and recapitalizations; and refinancing. “It is a great time to take down fixed-rate financing,” he said.

When Hessam Nadji, managing director of research and advisory services at Marcus & Millichap, asked webcast participants if job growth does not improve over the next 12 months, will apartment demand contract, stay the same or get stronger, 64% said it would stay the same, 22% said it will continue to get stronger and 16% predicted that it would contract. According to Nadji, as also mentioned in another GlobeSt.com article, companies aren’t expanding or hiring aggressively, which is something he expects to see through 2012, “but companies aren’t panicking.”

Nadji pointed out that “The job creation trend is still below expectations, and the muted housing market will have a tremendous affect on consumer sentiment. Companies need to enter an expansion mode for us to see improvement, and that won’t happen until 2013.”

Another interesting participant question was whether or not interest rates in 2012 would be somewhat higher, be much higher or be about the same. Approximately 40% of participants said somewhat higher, with 58% saying “about the same,” while only 1% predicted “much higher.”

On the construction side of this cycle, Nadji said that developers are working to bring new product to the marketplace that will be delivered in 2013 and 2014. “At a macro level, we don’t see overbuilding,” he said.

Overall, the webcast echoed key points from a previously reported midyear webcast from the company. In that webcast, Nadji pointed out that lowest apartment vacancy markets include: New York; Minneapolis; San Jose, CA; Portland, OR; San Diego; San Francisco; Milwaukee; and Philadelphia. Higher vacancy markets mentioned include: Jacksonville, FL; Houston; Tucson; Atlanta; Phoenix, Las Vegas, and Columbus, OH.

Source: GlobeSt.com

Apartment on Iowa in North Park sold

November 9, 2011

The five residential units in North Park at 4342 Iowa St., San Diego 92104, have been sold for $561,000.

The buyer was Draper LLC, 7011 Draper Ave., La Jolla 92037. The members of Draper are Anthony John Henry Pauker and Kristee Anne Beres Pauker.

The acquisition was financed by a $350,000 loan secured by La Jolla Capital Group through Mission Federal Credit Union.

The sellers of the property (assessor's parcel) were David and Nicola Fiedler.

James V. Carter, senior managing director/principal of Apartment Realty Group (ARG) negotiated the transaction.

The rental units total 3,374 square feet and were constructed in 1956 on a 7,000-square-foot lot.

The rentals consist of three single-level detached units, and two units located in the rear building above four garages.

The unit mix consists of one two-bedroom/one-bathroom unit and four one-bedroom units, all with the original hardwood floors.

In November 2001, the property was sold for $450,000, with financing of $315,000.

Source: San Diego Source The Daily Transcript

Recession Fears Eased: Economy Grows at 2.5 Percent in Third Quarter

By Jim Puzzanghera

RISMedia Image

The economy grew at an annual rate of 2.5 percent in the three months ending Sept. 30, the government reported, easing fears that the nation would fall into a second recession but still too slow a pace to cut significantly into the high unemployment rate.

“We’re inching our way forward,” says Diane Swonk, chief economist at Mesirow Financial.

The new data from the Commerce Department on Thursday showed slow but steady improvement in the economy throughout 2011. The third-quarter data was in line with economists’ projections.

Consumer spending, particularly on automobiles, helped boost growth. Personal consumption increased by 2.4 percent, compared with just a 0.7 percent increase in the second quarter.

Much of that increase, as well as other economic activity, was consumers and businesses catching up after the extremely slow growth of early this year, caused in part by the supply-chain disruptions of the Japanese earthquake and tsunami, Swonk said.

But even trying to make up for the slow growth in early 2011, the “re-acceleration” of the economy in the third quarter was not at breakneck speed, Swonk said.

“Given the weakness we saw earlier in the year, this is catch-up with not a lot of catch-up,” she says. “Two steps forward with one step back.”

Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, called the third-quarter growth “an unsustainable spurt.” She noted the group’s closely watched index of consumer confidence plunged this month to levels not seen since the recession ended in 2009.

“Continued woes in the housing market are overshadowed by consumer concern over the anemic labor market, as highlighted by the decline in consumer sentiment back to 2008-09 levels,” Bostjancic says in a statement. “Sustained economic growth above 2.0 percent is simply unlikely.”

Still, the threat of a double-dip recession is on hold for now, although the economy is “still muddling along, not cruising along,” Swonk said.

Fears of a second recession were stoked when the economy barely grew in the first three months of the year, expanding at an annual rate of just 0.4 percent. A recession is two consecutive quarters of economic contraction.

Things were looking only slightly better in the summer, when the government estimated that the economy grew at an anemic 1 percent rate in the second quarter.

That reading in August, combined with continued poor job creation and the historic downgrade of the U.S. credit rating by Standard&Poor’s after the bitter debt-ceiling debate, led economists to warn the nation was in danger of slipping into a second recession a little more than two years after the last one ended.

But last month the government revised second-quarter economic growth up to 1.3 percent. And increased consumer spending and other data began pointing away from another downturn.

Source: RISMedia

Half of US Mortgages Are Effectively Underwater

8 Nov 2011

Diana Olick
CNBC Real Estate Reporter

 

Getty Images

 

A new report on still-falling home prices today highlights the fact that the lower those prices go, the more American borrowers fall into an negative equity position; that is, they owe more on their mortgages than their homes are worth.

Most analysts will tell you that negative equity is the number one problem in the housing market today, even worse than foreclosures, because it causes foreclosures, stymies consumer spending and traps potential home buyers and sellers in place.

Negative equity rose to 28.6 percent of single-family homes with mortgages in the third quarter of this year, according to Zillow. That's up from 26.8 percent in the second quarter. In real terms, that's 14.6 million borrowers.

Many of those borrowers are already behind on their mortgage payments, and some are likely already in the foreclosure process. The rest of them are in danger of defaulting, not because they can't pay their mortgages, but because they either won't want to (seeing as they will never see any real appreciation in their investment) or because any change in their economic or personal situation might force them into default (change of job, divorce).

While 14.6 million might seem like a lot, it's not the real number when you consider negative equity in housing's recovery. That's because it doesn't factor in "effective" negative equity, which is borrowers who have so little equity in their homes that they cannot afford to move. 

Consider the following from mortgage analyst Mark Hanson:

On US totals, if you figure average house prices use conforming loan balances, then a repeat buyer has to have roughly 10 percent down to buy in addition to the 6 percent Realtor fee to sell. Thus, the effective negative equity target would be 85%. You also have to factor in secondary financing, which most measures leave out.

Based on that, over 50 percent of all mortgaged households in the US are effectively underwater — unable to sell for enough to pay a Realtor and put a down payment on a new purchase without coming out of pocket. Because repeat buyers have always carried the market as the foundation, this is why demand has not come back. It's as if half the potential buyers in America died over a two-year period of time.

The foreclosure crisis grabs most of the media attention these days, but in order for housing to recover, the market needs to see activity.

It's as simple as buying and selling. Negative and effective negative equity are causing stagnation, which may in the end be far more detrimental than foreclosures. The argument to solve this problem is principal forgiveness, and it is gaining traction politically and somewhat less in the banking sector.

Principal forgiveness, or lowering the balance of a large chunk of the nation's mortgages, would be costly at best but could be catastrophic at worst. "Those thinking principal reductions are a panacea have never originated a loan, done the street level research, and do not really know the borrowers behind their data," argues Hanson. "More than likely it would create a far greater number of new strategic defaulters than the number it would legitimately save from Foreclosure." 

Source: CNBC.com

5 things to know about commercial real estate

Written by Lily Leung

Oct. 27, 2011

Civita, a new project in Mission Valley will feature a mix of condos and apartments. — John Gastaldo / Union-Tribune staff

I spent Wednesday at the Urban Land Institute fall meeting, a gathering of nearly 6,000 people in the real estate market, representing sectors that include land development, lending and planning.

Here are five must-know takeaway points from the convention, which covers housing but has a prominent commercial market slant. The weeklong function is being held at the Los Angeles Convention Center.

1) There's an air of uncertainty about the commercial market. Stephen Blank, senior fellow at the Urban Land Institute, used the word: "tenuous" or lacking in clarity. Part of that is due to erratic domestic policies, where U.S. government officials went from the "too big to fail" period of fall 2007 to current Dodd-Frank legislation that's "too big to read," Blank said.

2) Those in the commercial field feel over-regulated, impeding progress and growth, they say. Some suggested a more middle-of-the-road approach in financial rules. Mark Gibson, executive managing director of Dallas-based commercial real estate capital company Holliday Fenoglio Fowler, suggested the industry identify municipalities that are in the best spot to "enhance job growth."

3)Which takes us to the next point: employment. Blank, the ULI leader, said the key out of the country's real estate slump is job growth. Locally, certain sectors are showing stronger hiring potential than others. Among the in-demand jobs include nurses, internet developers and retail, show recent numbers from the state Employment Development Department. 

4) The overall commercial sector has been stagnant, but apartments are a bright spot. Rents are rising while vacancies are dropping, a scenario seen locally. Hessam Nadji, a veteran real estate analyst who's widely quoted, called retail the "dark horse" of the pack, with office and industrial at their bottoms.

5) Demographics will be very important in the coming years. The Social Security Administration says almost 80 million baby boomers will file for retirement benefits within the next two decades. Nadji says it will be important for industry people to pay attention to this group's needs and wants, as many plan to downsize and relocate. Another important demographic is what he calls the "echo boomers," also known as Generation Y. Both groups will represent great spending power.

Source: SignOnSanDiego

Home Lending Revamp Planned

New Rules Aim to Speed Refinancing

By Nick Timiraos
October 24, 2011

Federal regulators on Monday unveiled a major overhaul of an underused mortgage-refinance program designed to help millions of Americans whose home values have tumbled.
The plan is the latest White House effort to deal with one of the most critical impediments to economic recovery—a stagnant housing market caused in part by a surfeit of homeowners who are unable to refinance.
The overhaul will, among other things, let borrowers refinance regardless of how far their homes have fallen in value, eliminating previous limits. That could open up refinancing to legions of borrowers in Nevada, Arizona, Florida, California and elsewhere who are paying high interest rates and are deeply "underwater," owing more than their houses are worth. President Barack Obama is expected to tout the program in Las Vegas on Monday.
The plan will streamline the refinance process by eliminating appraisals and extensive underwriting requirements for most borrowers, as long as homeowners are current on their mortgage payments, according to administration officials and an official at the Federal Housing Finance Agency. Fannie and Freddie have also agreed to waive some fees that made refinancing less attractive for some.
The revamp is aimed at homeowners like Christine and Hector Penunuri of Gilbert, Ariz., who have never missed a mortgage payment and who both have jobs and good credit. Yet their application to refinance their five-bedroom home, which has fallen in value, was denied earlier this year because their tax returns showed a $1,000 loss in start-up costs from Mr. Penunuri's business, which isn't even his day job.
It's "absurd," says their mortgage broker, Steve Walsh of Scottsdale, because the loan is already guaranteed by government-backed mortgage company Freddie Mac.
The Penunuris could save $350 a month by refinancing to a 4% rate from their current 5.75%. They would use that money to put their two sons into junior sports, take a family vacation and pay off other debts, says Ms. Penunuri, 41 years old. "It's a win-win situation."
Freddie Mac declined to comment on the rejection of the Penunuris' earlier refinancing. Freddie Mac and sister company Fannie Mae together guarantee roughly half of the nation's $10.4 trillion in home loans outstanding.
Regulators are revamping a program rolled out two years ago, the Home Affordable Refinance Program, or HARP, which lets borrowers with less than 20% in equity refinance if their loans are backed by Fannie Mae or Freddie Mac. President Obama announced HARP roughly one month into his presidency. So far, only 894,000 borrowers have used it, of which just 70,000 are significantly underwater.
"It hasn't worked," said James Parrott, a White House economic adviser, in a speech last month.

Officials at the Federal Housing Finance Agency, which regulates Fannie and Freddie, estimate that between 800,000 and one million more borrowers should be able to refinance. "It's in our interest to have these borrowers refinance into lower rates and continue to pay," said an FHFA official.
Monday's refinance announcement is separate from a recent push by state attorneys general to extract concessions from banks to refinance underwater mortgages. That effort, part of the months-long negotiations to settle alleged foreclosure-processing abuses, would apply only to loans held on the books of five of the nation's largest banks, a much smaller subset of loans.
In past downturns, lower interest rates engineered by the Federal Reserve were a powerful antidote for a sluggish economy. Falling mortgage rates triggered a refinancing wave that lowered homeowners' mortgage payments, freeing up cash for other things. That, in turn, helped to stimulate spending that boosted economic growth.
This time around, falling mortgage rates—now averaging just 4.11% for a 30-year fixed-rate mortgage, according to a Freddie Mac survey—haven't packed the usual oomph. The reason: Many homeowners haven't been able to refinance.
CoreLogic, a company that tracks 85% of all mortgages, estimates that 20 million borrowers with equity in their homes could cut the interest rates on their loans by more than one percentage point if they could refinance. That's about a quarter of all the homeowners in the country.
Because a refinanced mortgage is treated like a brand new loan, refinancing is nearly impossible for another eight million borrowers whose homes are worth less than their mortgages, unless they qualify for HARP.
But what about those who still have equity in their homes? Some have blemishes on their credit and employment histories or don't have enough income to qualify under today's tougher lending standards. Some find refinancing isn't worthwhile after factoring in new fees imposed by Fannie and Freddie or other closing costs. Still others can't get a refinancing application through a clogged mortgage-processing system.
That's a big obstacle to a stronger economy. Goldman Sachs economists estimate that if current borrowers with a 30-year fixed-rate loan backed by Fannie or Freddie were to refinance, they would save $24 billion annually. Researchers at Columbia Business School estimate that the benefits would accrue primarily to working- and middle-class borrowers with mortgages below $200,000.
The changes should help borrowers like Carol Gesior, who has two underwater mortgages, backed by Freddie Mac, on suburban Chicago properties she bought for siblings. She says she tried to refinance but her bank, Citigroup Inc., told her she couldn't without equity. She was unaware of HARP. If she could refinance both properties, she says she would replace her 1995 Ford Crown Victoria.
"I made a commitment. I signed an agreement to pay. But I didn't do anything to cause the values of these homes to decrease," says Ms. Gesior, 52, an office manager at an investment management firm. "Any logical person would have walked away already."
A Citi spokesman says the company is "happy to work with this client to explore refinancing options that may be available to her."
One problem is that bankers or other mortgage originators shy away from refinancing all but the safest borrowers because Fannie and Freddie can force a lender to buy back a loan if underwriting flaws emerge. In response, lenders are asking for extra documentation of incomes and scrutinizing appraisals, steps that raise costs and lead to more denials.
Another obstacle is new fees that Fannie and Freddie charge borrowers with less-than-perfect credit, even if the borrower's existing mortgage is guaranteed by Fannie or Freddie.
The changes being prepared by federal officials should boost refinancing because they will let banks avoid the risk of any "buy-back" on a HARP mortgage as long as borrowers have made their last six mortgage payments and they prove that they have a job or another source of passive income. They are also set to reduce loan fees that Fannie and Freddie charge. The fees will be waived on borrowers that refinance into loans with shorter terms, such as a 15-year mortgage.
Pricing details won't be published until mid-November, and lenders could begin refinancing loans under the retooled program as soon as Dec. 1, according to federal officials. Loans that exceed the current limit of 125% of the property's value won't be able to participate until early next year. The program's expiration date, originally next June, will be extended through 2013. HARP is only open to loans that Fannie and Freddie guaranteed as of June 2009.
Mr. Walsh, the Scottsdale broker, says such changes could lead him to hire "a ton" of new loan officers. "I have a line out the door of people who want to refinance under that program and can't," he says.
Refinancing can't fix the biggest problems eating at the housing market. Tight lending standards and high volumes of foreclosed-property sales are putting pressure on home prices at a time when demand is weak, potentially creating more underwater borrowers.
But refinancing could help those borrowers repair their balance sheets and guard against future defaults. If lenders and regulators successfully execute the changes, they could be "amazingly powerful," said mortgage-market pioneer Lewis Ranieri. "It'll start to create the confidence which is largely what's keeping the system from going forward."
The changes could spur an additional 1.6 million refinanced loans by the end of 2013, assuming interest rates don't rise sharply, according to Mark Zandi, chief economist at Moody's Analytics.
For the very safest homeowners, falling mortgage rates have been a bonanza. Some have become serial refinancers. Jim Wozniak locked in a 3.88% rate for 30-year fixed-rate mortgages for his primary residence in Brookfield, Wis., and his lakefront home in nearby Hartland late last month. Replacing 4.25% loans, he will save $2,700 annually.
"This is probably my third time in three years," says Mr. Wozniak, a 54-year-old investment adviser who says he has an excellent credit score and lots of equity in both properties.
For others, the hurdles are insurmountable. Appraisals are a big one. When an appraisal shows that a property has too little equity, lenders sometimes order a second appraisal. "You get into these appraisal wars, often at the borrowers' expense," says Marietta Rodriguez, the national director for home-ownership and lending at NeighborWorks America, a nonprofit housing group.
Steven Eisner, a 59-year-old attorney in Haddonfield, N.J., says he expected to sail through the process when he tried to refinance last month because he has good credit and strong income. Instead, he was startled to find that the appraisal on his vacation condo in Bonita Springs, Fla., came in so low he would have needed to ante up $52,000.
He put 25% down when he bought it four years ago. But, because of sagging home prices, his equity has declined to just 10% of the property's value. Refinancing "is simply not worth the trouble," says Mr. Eisner, whose mortgage is guaranteed by Fannie.
Not everyone benefits from encouraging more refinancing, of course. Banks and investors in mortgage-backed securities—including Fannie and Freddie and the Federal Reserve—stand to lose billions if performing loans pay off, leaving investors with cash to reinvest at today's lower rates.
"Somebody's going to get hit. This isn't a free good," says Anthony Sanders, a real-estate finance professor at George Mason University in Fairfax, Va.
That doesn't faze Mr. Eisner. "We've certainly done enough to prop the banks up," he says. "These are loans that everyone knew could prepay."
The success of any refinance push rests not only on whether policy makers can untangle a Gordian knot of technical hurdles, but also on whether they can get buy-in from private-sector players. One major obstacle to refinancing is that the mortgage industry has shrunk. Four big banks now control more than 60% of the mortgage market. Many originators, including the biggest banks, have cut staff or shifted loan underwriters into units working through piles of delinquent mortgages.
New rules designed to prevent independent mortgage brokers—who originate loans on behalf of a bank or other lender—from fleecing consumers have made it harder for them to compete with bigger lenders that aren't subject to the same rules. For example, new compensation rules make it less attractive for brokers to originate smaller or more complicated loans.
The reduced competition has led to longer processing times and higher prices for consumers. When their borrowing costs fall, banks aren't necessarily reducing the rates they charge borrowers by the same amount. Banks with big market share "know they can get away with it," says Thomas Lawler, an independent housing economist in Leesburg, Va. "The market's just not as competitive as it once was."
Industry executives dispute the notion that the market isn't competitive but concede that the industry wasn't ready to handle a surge in applications after rates dropped two months ago.
"Capacity constraints" will be temporary because lenders are hiring more staff, but "in the short run, there's no question that's a challenge," says David Stevens, the chief executive of the Mortgage Bankers Association. Lenders are going "through a lot more checks and balances simply to get a loan approved safely and soundly."
Some spurned borrowers aren't giving up. Barb Skaer, 70, of Appleton, Wis., and her husband wanted to refinance a $402,000 mortgage on a second home that appraised at $547,000 two years ago. She says they have strong credit scores and own part of a manufacturing business that makes bobby pins and hair clips.
Ms. Skaer says their bank, J.P. Morgan Chase & Co., quoted a 4% rate. But she says her loan officer told her she and her husband wouldn't qualify for a new loan because their income from their factory business declined the past two years. A J.P. Morgan spokesman declined to comment.
Ms. Skaer says they are appealing the decision at their bank and may go elsewhere if that doesn't work.
"Our theory is that if we can afford [the current payment of] $2,189 per month, we should be able to afford $200 less by refinancing," says Ms. Skaer. "This makes absolutely no sense to us, and we are not taking 'no' for an answer." 

Source: The Wall Street Journal