MARKET MOVEMENT
REFIS TAKE THE TOP SPOT Purchase business looks iffy for 2020, but refinances keeping pipelines full BY NORM BELL | CONTRIBUTING WRITER, NATIONAL MORTGAGE PROFESSIONAL
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oan originators aching to see a surge in purchase mortgage business this year may be waiting a while for satisfaction. While some observers claim the second half of the year will unleash a tidal wave of pent-up demand, many others just point to the explosion of unemployment claims and closed businesses and argue demand may very well not be bolstered by willingness or ability. But refis, well … refis are another story entirely. For LOs, 2020 may well be the year that refinance activity not only saves their brokerages, but saves the national consumer economy as well. “My phone is ringing off the hook,” says Marc Summers, president of Advantage Mortgage Company in Clarkston, Michigan. Donald Frommeyer, a mortgage loan officer at CIBM Mortgage in Indianapolis, agrees, but says today’s volume is nothing compared to what’s coming. “Refis are going to explode; we just don’t know when.” These two industry leaders speak from experience traversing the roller coaster ride that the mortgage industry becomes in times of crisis. Summers is the president of the Association of Independent Mortgage Experts, which claims 40,000 members. Frommeyer is chairman of the 150,000-strong Originator Connect Network and is the former
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president and CEO of the National Association of Mortgage Brokers. They differ slightly only on when the next trigger point will come. Frommeyer said he has a thick stack of approved paperwork just waiting for interest rates to slip generally below 3%. He sees 2.75% as a likely target within eight months, as the nation works through the economic effects of the Covid19coronavirus. Summers said he expects rates to dip to the low 3s. He cautions that holding out too long might cause borrowers to miss out in what may well be a volatile lending market. If the deal adds up today, do it, he is telling clients. And if rates fall farther, refi again. Looking ahead, both warn that all the refi activity comes with risks and perhaps surprises. Despite the Federal Reserve’s efforts to pump trillions into the market, there is a real possibility lender liquidity issues could create disruptions, warns Summers. No-fee loans and cheap rate locks will vanish, he said. In the Michigan region, some lenders have already dropped the 60-day lock in favor of a mandatory 45-day lock. For these mortgage pros, concerns about early payoff penalties and servicer churn associated with refis are overblown. It’s a cost of business and smart operators don’t swim upstream against a tsunami.
| NATIONAL MORTGAGE PROFESSIONAL MAGAZINE
CONSUMER DEMAND ALREADY HIGH “Long-term, good results bring return business,” said Chasity Graff, owner and broker at LA Lending LLC in New Orleans. “I work mostly on repeat business and referrals and my email and phones are blowing up. I love it because it means I’ve made a lot of people happy.” While some homeowners are trying to pull money out of their homes to pay bills, other clients are being strategic and eager to run various lending scenarios to see what works best. “Borrowers are looking for ways to liquidate their assets and hold on to more of their income,” observed Graff. At the end of February, the 30-year fixed rate mortgage had declined to 3.373%, an attractive level that opened the refi spigot. Less than three weeks later, however, that rate had surged, cresting at 4.113% on March 20. That put a crimp in the refi pipeline. The driving force in the uptick was upheaval in the bond market as investors fled to cash in the face of the pandemic, but some of it was also that lenders arbitrarily hiked rates to slow a crush of applications they couldn’t keep up with. By the end of April, the bond market had reset and the 30-year mortgage rate dropped to 3.23%, with 0.7 points, the lowest level in the 49
