It seems like everyone is expecting the mortgage markets to drop to 4.5% and anything higher is "just so high".  Whenever we have rates showing 4.5% on  a 30 yr. fixed, it stays there for less than a day and by the time we call everyone in our pipeline, the rate has already moved up.  It makes us look bad when we call to give them the good news and then "oops, the rates have gone up."

Furthermore, our appraised values have dropped due in large part to the short sales and reo properties setting the market values, so someone who thought they had sufficient value to qualify, now finds they don't.  Fannie Mae and Freddie Mac have drastically increased their delivery fees and risk based pricing.   Bottom line is,  you might not see 4.5% unless your situation is perfect.

How did my clients get that magic 4.5% rate?  first off, it was a par rate, so it was a below market deal.  They've been good clients over the years and I don't mind giving a repeat client that kind of a deal.  Second, they had almost 800 ficos.  third, they weren't pulling extra cash out, just wanted a lower payment.  Finally, they had 20% equity in their home, albeit, it was much less than they originally thought they had.  My lender required a second appraisal and cut the value but it still left them with 20% or so.

Now the average call I have been getting since Thanksgiving for a refi usually goes like this:  "I bought my home in 2006 with zero down.  I hear the government has lowered the interest rates to 4.5% and I want to refinace and lower my rate and get some extra money to pay off my credit cards."  I've gotten pretty good at letting them down without being too hard on their expectations.

My fellow loan officers have file cabinets full of loans with unrealistic expectations.  I certainly won't turn down an application for a refinance, but I do make it a point to manage expectations.  I find myself working mostly on first time home buyer loans, as that seems to be the best use of my time.