A shift in strategy could be the difference between a slow year and a strong one
Last week’s move by the Federal Reserve to raise its benchmark rate seems to have slowed soaring 10-year Treasury bond yields, which should slow mortgage rate growth.
However, as several Fed members have stated in recent days, if energy inflation doesn’t subside, the central bank may have to take further action in upcoming meetings.
Loan volume today looks nothing like it did in 2020 and 2021, when a flood of refinances made it easy for originators to fill a pipeline. However, the current rate environment combined with so many low-rate mortgage notes still on the books means that a wave of refis isn’t in the immediate future.
Purchase business has become the priority for many loan officers, even as that market carries its own challenges. One mortgage executive says the fix isn't waiting for rates to bring that volume back.
Tony Kottenbrock (pictured top), SVP and head of wholesale at Newrez, said the loan officers holding up best in this market are the ones building new relationships daily.
"You definitely have to broaden your referral base," Kottenbrock told Mortgage Professional America. "Developing that relationship today is as important as getting that loan for future loans. It still starts with realtors, but you've got to be willing to expand your referral base. Financial planners, where second mortgages really come in. Attorneys, maybe even particular tax attorneys and divorce attorneys."
The change in second mortgages
Kottenbrock said that expansion starts with a type of loan some originators have dismissed as not worth their time.
"You got to take advantage of every opportunity right now," he said. "If you're closing yourself off to particular loans because you don't think you can make enough money on an average loan size being smaller on a second, I think that's the wrong way of going about it. There's plenty of large seconds out there right now."
He said the math behind referring a second mortgage elsewhere has flipped from what it used to be, and originators who haven't caught up to that shift are handing away business they don't need to lose.
"We used to use second mortgages to develop a referral from a bank. You would send your borrower to the bank or credit union to do the second mortgage," he said. "In today's world, if you send your borrower to a bank or credit union, you may not get them back for that first mortgage. So why not stay in front of your borrower today? Help them out with the debt refinance or debt consolidation second."
Staying in front of clients
It’s always important to build long-term relationships with your clients, but that becomes critical in challenging market conditions.
"You got to stay in front of your clients," he said. "It's amazing to see LOs that aren't using a CRM, or even if they've set up a CRM, they don't take full advantage of it. Borrowers will go online and start shopping for the best possible rate, and the best possible rate isn't always the best possible loan for every borrower.
“But if the LO is not staying in front of them, there's just too many avenues for those borrowers to shop. Whether it's wishing someone a happy birthday or just checking in, if they're not doing that, their chance of retaining that relationship gets smaller each day."
Newrez is trying to support that same discipline on the origination side. The company has been deliberate about which vendors it partners with, according to Kottenbrock, treating that choice as a competitive decision rather than a simple checkbox.
"We haven't necessarily just gone with the biggest vendor out there from an automation standpoint," he said. “We're doing a lot of testing with it right now, and our plan is for us to be at some point by year-end to start being ahead of a lot of our competition."
He said that infrastructure is meant to work alongside a broader push to get loans submitted and into underwriting faster.
"It's the most important thing to a lender right now to make that easy for an LO," he said. "If an LO can't easily go in and get a loan into underwriting, then you're missing the opportunity from the start."
Kottenbrock said the referrals, the second mortgages, and the new technology point back to the same underlying philosophy.
"When the market does come around, you're able to keep that client, and you can refinance the first and the second at that point," he said. "Assuming you did the first on the borrower, you have three loans later. You put the borrower in a better situation, and you've created a borrower for life."
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