Consumer Wins

EXCERPT – Ok so maybe not a good thing but it’s not the end of the world. Of course there is the slowdown in production, the phone not ringing, the increased pressure to hit your numbers; these are not usually considered good things but hold off on the Kool-Aid for now. First off refi’s are not gone forever, as we all know the housing market is cyclical. When interest rates rise and the refi’s go away we enter into a purchase phase. This is necessary for the next refi boom, without this period of rising interest rates and a mostly purchase market, refi booms would be impossible. We usually see this every few years, after a period of low rates when everyone is refinancing like crazy and the phones are ringing off the hook with new applications (although, as of late, not as many actually qualifying) until the refi market is tapped out. As the uptick in rates begins to slow down the refi market, it is imperative to understand what is coming and how best to not only survive it, but to thrive.

The companies and loan originators that have prepared for this change may actually see their pipeline increase. This will be partly due to a thinning of the industry; we have already seen most of the major lenders lay off people in mass. As this downsizing continues, we see a survival of the fittest take over where the strong (most prepared) thrive and the weak (relied on incoming refi phone calls) wither and die on the vine. Those lenders and loan officers that have spent the time and hours developing their referral system, their builder and realtor business and have a focus on relationships will come out on top and even more important will be in place for the next refi boom.

The consumer also wins during this switch over to purchases. How, you ask? Well as production decreases, the importance of every transaction goes up exponentially. This means more time spent working with the borrowers to ensure each transaction has the greatest chance of approval and closing, more time available to review each file to ensure compliance and completeness thus again increasing the chances for approval and funding. This increased competition forces the industry to focus on customer service instead of speed and rates. Purchases are much more time consuming with a great deal more moving parts than a simple refi. The successful loan originator will have to possess extraordinary relationship building and management skills to handle all the parties involved (buyer, seller, realtors, builders, home inspectors, appraisers, title, and more) and of course on a purchase it is common to have this group of people on three different transactions. You will have to maneuver through this minefield of people on your purchase but many times also on the buyer’s current property and your seller’s next property.

As the refinance market slows down to make the turn into a purchase market it is a great time for companies to re-examine not only their structure, their marketing and their personnel but it is also an ideal time to make sure you have the correct compliance procedures in place. The CFPB compliance changes take effect in a few short months. Are you ready? Do you know how the new rules on maximum points and fees will affect you, especially if your company has affiliate relationships? The appraisal component is a big compliance point but you can reduce your exposure by working with a compliant focused AMC such as Nationwide Appraisal Network and be able to spend more time building those relationships that are going to help you survive and thrive in the near future.