Despite a drop in mortgage shoppers, opportunities are out there: report

Sales Boomerang report shows borrower opportunities for ARMs, seller-buy down strategy

In times as tough as these, mortgage lenders must be proactive in borrower outreach and find consumers’ home finance needs if they’re going to close a deal, a new report by mortgage relationship data company Sales Boomerang concludes.

Based on decreases in borrowers’ mortgage inquiries, early payoff (EPO) of mortgages and new home listings in the third quarter, Sales Boomerang‘s latest mortgage opportunities report outlined potential dealmaking strategies for lenders in challenging times for the mortgage industry.

In the third quarter, less than 3% of customers received a mortgage from a competitor in the last 24 hours, down 12% from the previous quarter, according to Sales Boomerang. About 2% of monitored contacts, whose loan closed less than 6 months ago, shopped with a competitor that day, an 11% decline from the previous quarter.

As consumers stopped actively looking for new mortgage products, “lenders may find success capturing purchase opportunities by leveraging a seller buy-down strategy to combat high interest rates that might prevent buyers from committing to a purchase,” the report said. 

Lenders, including United Wholesale Mortgage and Rocket Mortgage Pro TPO, launched temporary rate buydowns that allow borrowers to receive lower mortgage rates at the beginning of their loan terms by using seller concessions as part of the payment. UWM rolled out its product in August in hopes to court more borrowers who expect an increase in their income in the next few years or who have seller concessions to use and want to take advantage of a low rate upfront. Rocket launched a similar product in September.

Sales Boomerang reviewed data from more than 150 residential mortgage lenders, a subset of its clients that use its borrower intelligence and retention tools to monitor customer records to identify market opportunities that are relevant to borrowers and lenders. 

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FICO scores for 6% of monitored contacts improved in the third quarter, an increase of more than 33% from the second quarter – suggesting lenders need to get creative in serving consumers’ home finance needs as they reconnect with those whose credit scores went up. 

“Recent data backs up the claim that borrowers can benefit from an adjustable-rate mortgage (ARM), so lenders should be prepared to educate borrowers on the pros and cons of these products,” the report said.

Borrower demand slumped with mortgage demand hitting a 25-year low last week amid the ongoing economic uncertainty and affordability challenges. In turn, homebuyers looking for rate relief turned to various ARM products to reduce their monthly mortgage payment. 

The overall ARM loan share rose to 12.8% of all applications last week, marking a 14-year high, according to the Mortgage Bankers Association (MBA). Rates for 5/1 ARMs ticked up to 5.65% last week from the prior week’s 5.56%.

About 30% of monitored contacts engaged in one more of 15 credit activities that may put their serviced loan at risk in the third quarter, up 40% from the second quarter, according to Sales Boomerang. This means more consumers took on unprecedented personal debt, spending in other areas as the housing market continues to cool.

”To find success in today’s market, lenders not only must be proactive in their borrower outreach, they also must level up the creativity of the financial strategies they bring to the table,” said Sales Boomerang “chief visionary officer” Alex Kutsishin.

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