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Record Low Rates and Purchase Demand Create Mortgage Supernova -- 5 Key Takeaways for Brokers

Sep 23, 2020 | General, Non-Delegated, Broker

Freddie Mac economist and top originator share 5 key takeaways for brokers

With purchase applications up 30% and refinances up 51% year-over-year, there’s no question we are in the middle of a booming mortgage market -- a supernova event. But, how long will it last and how can the mortgage broker community prepare for what’s next?  

In the Home Point live Elevate LIVE event, Will Pendleton, Senior Managing Director of Third Party Originations at Home Point, interviewed Len Kiefer, Freddie Mac’s Deputy Chief Economist, and Shelby Elias, CEO of United Wholesale Lending on the housing market and what it means for brokers.  

Sustained low rates fuel refinances 

Kiefer pointed out that the current refinance boom is driven not just by the fact that rates are super low right now, it’s that recently rates were a lot higher. In fall 2018, rates were up to 5% and now they are at a record low of 2.87%. The result is a lot of potential refinance borrowers. Kiefer, along with other economists, are predicting that rates will remain relatively flat over the next few years. Projections are that refinance volumes fall somewhat next year from this year’s massive number, and then in 2022 we could see things pull back as we exhaust the potential refinance opportunity. 

Purchase market will grow with fundamentals holding 

Kiefer said that while the purchase market took a hit initially due to coronavirus, the market is now bouncing back very strong -- even despite broader challenges in the economy. The housing demand from the sheer volume of millennials will continue to provide steady incremental growth on the purchase side for the next three or four years. Keifer projected solid growth on the home sales side with expected volumes up around 20% in 2021 – if mortgage rates stay flat.   

Election may cause volatility but won’t dramatically change market conditions 

Kiefer said we could expect some short-term rate volatility around the election, as we saw in 2016, but long-term rates will remain similar to what we see today. We likely won’t see bigger market changes until we get into budgets and tax policy decisions that would impact the broader economy.  

Originators can nurture realtor relationships right now  

When the refinance boom began, Elias’ initial instinct was to do as many refinances as he could. But, as he tried to keep up with that volume, he noticed an opportunity in the market to focus on a longer-term, more sustainable strategy. Elias slowed down his refinance marketing and began to focus on serving referral partners, creating new connections, and prioritizing purchase business. This is a point in time when referral partners aren’t hearing as much from brokers or other partners, and there’s an opportunity to get to be first in line. He said that while loan officers may feel like it’s only refinances in the pipeline, there’s more opportunity than ever on purchase -- and Realtors are looking for engaged partners. 

Opportunity to reshape your operations 

Today’s record pipelines on top of general pandemic stress, can result in burn out for loan originators and operations staff. To better support his people, Elias said he organized their process into pods. Each pod is focused on a specific activity – from front end application to closing. It’s giving loan officers the efficiency they need to manage volume and making it easier for him to hire and train new employees for specific tasks. For example, he can get entry level staff with no mortgage experience and train them quickly to do a single process. By investing in these new systems now, his organization is improving the overall borrower experience which will build trust and enable long-term success.  

Watch the full replay of the event for more important takeaways.

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