Well the beat goes on... it looks like deflationary times are upon us. Rates show no signs of going back up. There is room in the spread for rates to go down more but every .125% below 5.0% causes an exponential flow in payoffs/refis. This is a killer cost for the servicers and they just don't have the capacity to refill that depleting portfolio. So expect bungee behavior as rates hit 101 pricing below 5%.Don't tell your customer that you'll call him at 4.5%; "if it has dropped .5 in a month, it can do it again".
Many customers are enamored with rates in the 4's and will pay points for them. Matter of fact the spreads between 99to101 pricing favor multi-point pricing. So be sure to start all rate quotes in the mid to low fours with points even if the customer has asked for a No/No. It is your job to find out the best deal for them, not just give them what they want. You need to probe to find out what they need. And if they are holding that mortgage for 4 years or more, the investment of points and closing costs can be a great reward.
500% was this week’s note from the MBA on monthly increase in volume. Every originator has to realize they are in the land of milk and honey after many months in the desert, and too many of you are lactose intolerant diabetics. No business in any industry can handle this kind of increase smoothly. Neither can any business be expected to increase overhead to handle the current fleeting volume knowing how pitiful purchase apps are, and are expected to be. Many of the mortgage industry staff who have been eliminated over the last few years, smartly left the industry for more security. Picking up staff and plugging them in seamlessly won't be as easy this time as so much more is expected in an application. Sure there are fewer flavors but you better know your ever-changing guides and be up on the tricks of govie lending. Temps will struggle and expose you to risk.
Realistically, you need to be combing your database and going after those loans that are in the sweet-spot on price and underwrite/value. Don't just mail drop the entire database over and over. But don't ignore your clients who are out of luck, difficult, or premature. Make a quick call or email letting them know your assessment of their situation. If they are a client you know will be tough, set them up with your neighborhood banker whose price is smoking. This banker will send you the deals he can't do, be a source for HELOCs and Commercial, and odds are he won’t pursue your client. The banks notoriously prohibit or at least don't facilitate database management plus they don't have aggressive telemarketing/solicitation like the major servicers. Keep the customer--lose a deal that may drag you down when you need to be running on all cylinders -- all good.
In order to smooth out the volume spikes, it is wise to correctly assess the time-line and difficulty of every refi at application. Most lock periods are required to be at least 45 if not 60++. But lock periods are just insurance policies to protect you; everyone hates to pay but it is the cost of business in a volatile market. The key is to not process to expiration date but to assess an estimated time to complete the deal. If it’s a slam dunk pick a day 3 weeks out. Tell all parties that this is the target date and that these are the actions that need to be accomplished to hit that target. All dates on a closing calendar need to be filled up like the reservation book of a popular restaurant. You know how you get a call 2x before your date to confirm you will be there? They also build a little slack in to accommodate their best customers and potential walk-ins(rush deals and redraws), while booking tight every 15 minutes. We need to maximize the slots to sell all the perishable goods and cover the overhead of bodies and buildings that are their either way. In the kitchen, there is an expediter whose job it is to maximize the order flow to the chef capacity and ability and to ensure the orders go out on time and looking good. You need that hat to be worn in your shop by someone.
Remember the general public does not understand why refinancing isn't just a paper sent in the mail to sign. They have no respect that this is a brand new stand alone loan, unassociated with the first. So you need to be exceptionally clear and direct while listening and servicing or madness and disappointment will prevail.
Be smart in how you leverage your resources. As my Grandfather used to say " Take what you can eat, but eat what you take".
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