COVE R STORY
As Rates Rise, Mortgage Originations Need To Vary Portfolio LENDERS, WHAT ARE YOU GOING TO DO NEXT?
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By R O B CHR IS M AN, M ORTG AGE BAN KE R M AG A ZIN E CON TRIB U TIN G WRITER
s we move through 2021, rates are going to do whatever rates are going to do. But how lenders react, or be more proactive than their competitors, will be what matters. And it may require some thinking outside of the box, a little more difficult on a Zoom call, but becoming easier as employees return to the workplace and can actually informally chat. Lenders have a variety of tools at their disposal which can be used to help new clients or retain old ones. For example, why should every loan originator care about the age of housing in their area? Do you, as a lender or vendor, have a product to help previous clients with renovations? The median age of owner-occupied homes across the U.S. is 39 years, according to the 2019 American Community Survey. New York comes in at 60 years (Washington DC is 79 years, but is not a state) and the states bottom out at Nevada which has the newest at a median age of 23 years. The age of housing is an important remodeling market indicator. We all know that older houses are less energy-efficient than new construction and ultimately will require remodeling and renovation in the future. And your previous clients, like the ones you gave 2.75 percent 30-year fixedrate loans to last year, may need a renovation loan, or another product if they use their homes for more purposes or require additional space.
KING CASH
Which brings up the topic of cash out refi-
6 MORTGAGE BANKER | MAY 2021
nances. The housing market has aware of what is being proposed been a solid gainer for most of to support affordable housing. 2020 and halfway through 2021. The plan’s overview calls for the A cash-out refinance swaps out funding to “produce, preserve, a borrower’s existing mortgage and retrofit more than 2 million with a new loan for more than affordable and sustainable places the current mortgage (provided to live.” the borrower has equity built up Any plan that includes buildin the home), with the difference ing or preserving more than 1 ROB CHRISMAN going to the borrower in cash, million housing units should usually for home improvements, matter to MLOs. paying off credit cards, or other financial One million units that in theneeds. Borrowers can usually “cash-out” up ory are affordable, resilient, to 80 percent of their home’s equity. Loan accessible, electrified, and enofficers should be well-versed in their comergy-efficient. The plan would pany’s programs. Yes, the rate will be higher also improve the infrastrucfor someone that you financed in the last ture of the roughly 1.2 million year, but if they need the cash, and the rate units of public housing that is lower than their credit card rate… currently exist. The plan will provide tax credits, competiAFFORDABLE HOUSING EFFECTS tive grants, and other forms of Financing existing housing stock is only one support to spur partnerships part of the equation that lenders are tuned between local government, into. Creating new housing opportunities nonprofits, and private develis important to the new Biden Administraopers, and it will leverage the tion, and originators should know what is government’s money with rehappening in Washington DC. Housing is sources in the private sector. included in the overall Infrastructure bill, as it should be given the role housing plays IN THE ZONE in stable communities. First-time home The plan tries to address some buyers are reliable neighbors and consumof these nonfinancial barriers. Small businesses are supported by more ers by also focusing on elimicustomers, and stable housing represents nating exclusionary zoning economic stimulus and economic developlaws, the structural policies ment for all businesses. on minimum lot sizes, parkWhile it may not be directly relevant ing requirements, and preferto your current clients, it is important for ence for single-family homes mortgage loan originators (MLOs) to be that often prevent affordably
