Refinance mortgage application volume has skyrocketed to record-breaking highs. Favorable interest rates since the start of 2020 spurred a positive outlook in the mortgage industry, but now many mortgage professionals are struggling to handle significantly increased demand. Overall, refinance activity is currently at its highest point since 2009, and lenders are scrambling to handle unprecedented levels of refinance inquiries and applications.
The Current Refi Environment
Even before the surprise weekend FED rate cut, mortgage interest rates were at 10-year lows. Last week, the 30-year fixed rate mortgage offered an average interest rate of 3.29%, according to the Freddie Mac Primary Mortgage Market Survey (PMMS). In response to the historically low interest rates, the Mortgage Bankers Association (MBA) was prompted to alter its original 2020 Refinance Forecast. The MBA now indicates a 20.3% gain in application volume is expected, which could bring refinance mortgage origination totals to $2.61 trillion.
In a recent press release, Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting, offered banks and lenders a projection for the spring housing market. Kan said, “As lenders handle the wave in applications and manage capacity, mortgage rates will likely stabilize but remain low for now. This, in turn, will support borrowers looking to refinance or purchase a home this spring."
How Should Mortgage Marketers Prepare Originators To Handle Record Refinance Demand?
With record refinance application volume, it’s more important than ever to follow best practices to make sure your team gets the most out of these rate cuts.
Automate Client Communications
No matter the scale of loan volume, each individual prospect expects a steady exchange of information from their lender. The best way to manage regular communication with current and prospective clients is by deploying automated messaging. Lenders should consider sorting their contacts into a series of segments, based on intent and urgency, ranging from hot to cool. Hot contacts should receive communications the most often. The rate of communications should depend on which milestone a contact has achieved.
Operational efficiencies could be a hurdle, but by keeping clients informed, a lender can set appropriate expectations among clients. No matter where borrowers are in a lender’s pipeline, prospective borrowers need to be encouraged to stay patient but remain organized. Processors, underwriters and compliance officers will benefit by assisting the most prepared clients first. The more prepared your borrowers are with documentation, and the more aware they are of lenders' requirements and needs, the more efficiently the transactions can be managed. In a high-demand market, efficiency will be directly connected to profitability.
Promote Benefits Of Rate Lock Extensions
Due to immense growth of refinance loan volume, it is likely impossible that lenders will be able to effectively manage every refinance application with the same speed. The worst fear for many homeowners who refinance is losing out on low interest rates because their rate locks expired before they were able to move forward with the loan processing. Rate lock extensions can be used proactively to protect borrowers from experiencing negative results from interest rate fluctuations that could occur before their loans officially close. Rate lock extensions allow borrowers to maintain the interest rates secured at the time of their applications for an extended, and clearly published, duration of time. Rate lock extensions are usually a paid option for borrowers, but during the refinance surge, lenders should consider offering rate lock extensions at no additional cost to borrowers. Locking rates longer periods gives lenders the opportunity to manage operational efficiencies and maintain steady flows of application reviews.
Continue Generating Demand
Even if current refinance volume seems unbelievable, this is not the time to go dark or slow down. By continuing to generate steady demand, lenders can ensure pipeline stability in the second half of 2020.
Look to all channels of refinance lead generation, including marketplace solutions and referrals. Also continue to nurture past clients to secure repeat business in the future. A strategic digital marketing approach, inclusive of email marketing, social media marketing, content marketing, digital advertising and lead generation, can help lenders acquire and retain customers, strengthen relationships with new and current clients and establish a healthy pipeline for now and in the future.
Need To Connect With Consumers Seeking Refinance Opportunities?
Using a combination of rich content and borrower resources, DMS connects the right lenders with the right borrowers at the right time to fill pipelines, improve closing ratios and scale businesses. DMS Consumer FinanceTM is a division of Digital Media Solutions® (DMS) that deploys high-touch service, proprietary digital media distribution and sophisticated matching engines.