T H E M O RTG AG E I N S I DER
Originators Need To Be Ready For A Mortgage Restart AS RATES ROIL THE MARKET OUTLOOK, IT’S TIME TO PREP THE SALES TEAM TO KNOW THE OPTIONS
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By R O B CHR IS M A N, M ORTG AGE BAN KE R M AG A ZIN E CON TRIB U TIN G WRITER
n late February, the bond dling, purchase business remains market threw lender’s rate as strong as ever given inventory sheets a major curveball. constraints. All across America, Namely, the “economics of we are seeing bidding wars for the restart” took over, and properties, consistently with mulrates shot higher. The rate move tiple offers over asking. This is also was not based on fundamental helping spur the demand for new news to a large degree, but instead construction, and purchase pipeon the hopes of an economic lines are bursting at the seams for ROB CHRISMAN recovery, post-pandemic, and lenders of all sizes. fears of inflation from the stimulus It may be worth devoting some of packages coming out of Washington DC. your resources that were geared toward refiLenders saw floating pipelines evaporate, nances toward purchases. Remember, there free extensions vanish, and borrowers no are 70+ million millennials, many of whom longer benefit from current rates. Most are finally moving out of their parents’ agree that there is more pressure on rates to homes or costly city apartments, looking to move higher versus moving lower, but 30start building home equity. Keep your name year rates in the 3 percent range is not the in front of local real estate agents and always end of the world and in fact lenders across ask for referrals. the nation are already planning for upward pressure on rates by dusting off programs POCKET EQUITY & training manuals and eyeing picking up Even with rate-and-term refinance applicamarket share. Let’s look at a few of the ways tions likely dropping off due to the recent this could be accomplished. rise in rates, cash out refinances remain an attractive option for borrowers given appreBUY, BUY BABY ciation around the nation. While many lenders are fretting about total A cash-out refinance replaces a borrower’s refinance volume in their pipeline dwinexisting mortgage with a new loan for more
than the current mortgage (provided the borrower has equity built up in the home), with the difference going to the borrower in cash. That can be spent on home improvements, general debt consolidation or other financial needs. Borrowers can usually “cash out” up to 80 percent of their home’s equity, which may be higher than many think due to recent home price appreciation. Usually the transaction must be used to pay off existing mortgages by obtaining a new first mortgage secured by the same property, or be a new mortgage on a property that does not have a mortgage lien against it. Lenders should check investor requirements and be well-versed in them for discussions with previous clients.
PDA FOR DPAS
All 50 states offer some sort of DPA (down payment assistance program) for borrowers. The Biden Administration has made it clear that first-time home buyers and affordable housing initiatives are paramount. A thorough knowledge of these programs is mission critical, as they can vary wildly from payments that are forgiven, those that are deferred, or even those that are subsi-
THERE ARE 70+ MILLION MILLENNIALS, MANY OF WHOM ARE FINALLY MOVING OUT OF THEIR PARENTS’ HOMES OR COSTLY CITY APARTMENTS, LOOKING TO START BUILDING HOME EQUITY. 6 MORTGAGE BANKER | APRIL 2021
