Mortgage

In a super-low rate environment, how can lenders get purchase loans done without putting refis on the back burner?

Consumers are shopping around for rates, pushing the fallout rate for refis

Last week, the MBA reported that refinance activity rose to its highest level since May, now accounting for 65.7% of total applications – and everyone involved in the mortgage process is working hard to make sure those transactions go through. But as companies continue to compete on low rates, lenders are trying to balance maintaining a strong purchase presence with meeting client expectations in the refi market.

Lenders are faced with strong external pressures on both kinds of loans, but with purchase loans, there is a homeowner waiting to move into a house, which exerts its own kind of stress. As companies try to manage longer appraisal turn times and a finite number of underwriters and support staff for all loans, refinances might get put on the back burner. To top it off, low rates are pushing homeowners to shop around — even walking on deals when they realize that the numbers they see advertised don’t meet their expectations.

According to Sean Johnson, branch manager at loanDepot, historically low rates have been the greatest driver of the refi boom, but people working from home is also a factor.

“With people not in the office, homeowners have more time to really sit down and research the benefits a refi can bring them and even shop for one right from their desk. They can ask themselves, ‘is this the best rate I can get?’” Johnson said. “Consumers sitting in front of their TVs are being bombarded from the media promoting essentially advertisements of these rates.”

This echoes what Mark Canale, senior loan officer and producing branch manager at Movement Mortgage, said to HousingWire last week. According to Canale, smaller companies that weren’t originally prioritizing refis are struggling to handle the influx of people looking to cash in on low rates, and he recommended recognizing what your work force can handle.

And there is a greater risk of wasting time with refis, since it’s so easy for current homeowners to shop around. The fallout for refinances could be anywhere from 20% to 30%, Johnson said.

“I want us to be efficient from a business standpoint, so I’m saying no to refis all the time,” Canale said. “But when I do say yes, we’re telling homeowners to lock in that rate and quoting them 60 days because they are already in the house, right? They aren’t going anywhere.”

So how can the industry maintain their refis? Lenders were in agreement that transparency with what can be delivered is the No. 1 priority as the market continues its ebb and flow.

“If you’ve done your job, your clients are going to reach out to you because there is a level of trust there. You may not have the lowest rate in the country but if you established that relationship and say ‘this is a fair loan’ you have to be okay with the outcome,” Johnson said.   

As for the future of refinances, lenders HousingWire surveyed said it will depend on the length of the low-rate market and how borrowers respond to recent refi fees imposed by the GSEs that could cost homeowners $1,400. Will that make shopping rates more pervasive, or less, or not affect it at all?

While the long term for refinances is still unknown, Jeff Gravelle, chief product officer at NewRez, said sustained low rates have created a great opportunity for millions of borrowers to lower their monthly payments and save money.

“The current refinance market has helped homeowners recognize meaningful monthly payment savings at a time when Americans need it most.”

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