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How Will You Keep Pipelines Full When The Refinance Market Slows?

No doubt about it, the refinance market is hot with rates at historically low levels. With rising home prices and improved rates, homeowners are able to save a significant amount of money over the life of a loan. As a result, many lenders are busy with refinances dominating their time. However, there is another boom in the housing market occurring at the same – the purchase market! That’s right…we are seeing a healthy refinance AND purchase market with mortgage applications for both increasing week over week. 

The Mortgage Bankers Association (MBA) tracks applications, refinances and purchases each week using a metric known as the purchase index. Mortgage applications in July 2020 for new home purchases increased 39 percent from July 2019. As of August 26, the index reported a purchase increase of 33% year over year and an increase of 34% for refinances year over year.  According to Joel Kan, associate vice president of economic and industry forecasting for MBA, “The home purchase market remains a bright spot for the overall economy. Purchase applications were essentially unchanged but were 33 percent higher than a year ago – the 14th straight week of year-over-year gains. Mortgage rates at record lows and households looking for more space are driving this summer’s surge in demand.”

This is fantastic! Except for one thing. The refinance boom won’t last forever. In fact, Fannie Mae and Freddie Mac just announced higher fees for refinances that go into effect on December 1, 2020. This means that consumers might have to pay more to refinance. With that in mind and the fact that a good majority of homeowners who qualify to refinance will have done so in the near future, it’s time to think about that pipeline again. 

Filling The Pipeline:  Referrals

With home purchases surging Realtors are finding brokers who aren’t too busy with refis to help them close new purchases. For some, the refinance volume may have kept them from taking on more purchase volume sending Realtors and consumers to find someone else. The brokers they can find to help them will end up getting the referrals and more business down the line. The threat of shrinking referrals could be real. The purchase market is showing gains week over week with a significant increase over 2019. Are you capitalizing on the purchase market along with the refinance market? If not, based on the latest from Fannie and Freddie, it may be time to make sure new purchases are a larger part of your volume share.

Filling The Pipeline: Non-QM

By now, the mortgage industry is aware that non-QM products are back. We have worked long hours to get our innovative loan solutions back to the market with improved guidelines and technology. Bank Statement, 1099 Income, Platinum Jumbo, Asset Qualifier, and Investor Cash Flow are available. There are around 18 million self-employed people accounting for 30% of all employees in the U.S according to the Department of Labor.  That is a lot of potential borrowers needing Bank Statement or 1099 Income loans. The Jumbo market is hot right now with borrowers wanting larger homes. The pandemic made many people realize that they need more space, especially if they continue to work from home. For those who just miss Prime Jumbo, a non-QM Jumbo product is necessary for them to qualify for their loan. Investors are trying to grow their portfolios with lower rates that are currently available. Our Investor Cash Flow product qualifies them on the cash flow of their rental properties without requiring tax or income documents. If the refinance market goes away, Agency loans alone won’t be enough to fill the volume. 

Non-QM is different now and Angel Oak has been a significant part of the education in the industry communicating how to utilize non-QM today. Our account executives are ready to tell you all about it and present to your Realtor clients as the expert on non-QM products. 

It’s an exciting time to be in the mortgage industry! Keep that enthusiasm making sure you have a plan when the refinance market slows down. We can help. Contact an account executive today for more information on our loan solutions that keep your pipelines full.