Handling the Refi Boom
Schneider, Howard, Mortgage Banking
Lenders faced a full-fledged refi boom when rates sank to the lows reached in January. Volume soared, stretching lenders' ability to lock loans and get them closed.
But technology made this year's refi boom easier to handle than previous booms.
A REFINANCING BOOM PUTS EVERYONE IN A MORTGAGE COMPANY ON THE FRONT LINES, and secondary marketers are no exception. High levels of new volume as well as large numbers of payoffs concern most of the organization. But the secondary marketing staff is making sure the money to fund loans is available and well priced. Coping with pipeline fallout rates that are more variable than usual, a warehouse credit line that may be stretched to its limit, servicing hedges that are challenged by unanticipated payoffs, and then selling new production on favorable terms all confronted secondary marketers when rates dropped in January. * But they seem to have done quite well managing the volatility of the first quarter of 1998-even though it was somewhat unexpected. "We knew there was a good chance that if rates continued to slide at the end of 1997, we would have a mini refi boom," says Joe Bowen, executive vice president of secondary marketing at AccuBanc Mortgage Corp. in Dallas. But because of the large number of adjustable-rate mortgages originated over the past few years-whose owners found January to be a great opportunity to secure fixed-rate financing--it soon became "more than a 'mini' refi boom," Bowen says.
"The overall industry was not expecting a decline in rates, which would heat up a refi boom quickly," says Cheryl Glory, director of the residential mortgage structured finance group at Fitch IBCA, Inc., in New York. She notes that mortgage bankers who already had been staffing up their retail branches or building a telemarketing unit as part of a strategic plan "have an edge over lenders starting those activities now that a refi boom is here."
Glory adds that the 1998 refi boom showed that technology investments in underwriting and servicing are paying off now. "This year's refi boom was much more manageable" than previous ones, agrees Cathy Stickelmaier, vice president and secondary marketing manager at First of America Mortgage Co. in Kalamazoo, Michigan, which recently was purchased by National City Mortgage Co. in Miamisburg, Ohio. "We use Fannie Mae's Desktop Underwriter on laptops at the point of sale," she notes. With the help of the agency's automated underwriting system, the company gets point-of-sale approvals 50 to 6o percent of the time, Stickelmaier says. She adds that First of America had been working with the system for more than a year and had distributed laptops to all loan officers by the end of 1997.
New approaches are still being evaluated throughout the industry. Glory notes that streamlined refinancing guidelines have helped lenders this year. For example, Fitch IBCA typically is comfortable with drive-by appraisals if they occur within four years of the loan's origination. Automated appraisals also can be useful in looking for overall declines in real estate values within a market, she adds. Generally Fitch IBCA finds them appropriate for refis if the lender is using the automated appraisals on its own servicing clients who are up-to-date on payments, and when the existing loan is less than four years old.
Combining these technologies with effective customer interaction helps lenders respond when rates are moving quickly. Glory says some lenders can transfer a call requesting payoff information to a loan officer who can pull up a credit report on the spot and seek to refinance that servicing customer immediately.
Many mortgage bankers have set up telemarketing units to respond to servicing customers looking to refinance. When combined with the lessened processing and documentation requirements of streamlined refinancings, it made it easier for lenders …
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Publication information: Article title: Handling the Refi Boom. Contributors: Schneider, Howard - Author. Magazine title: Mortgage Banking. Volume: 58. Issue: 8 Publication date: May 1998. Page number: 12+. © 2009 Mortgage Bankers Association of America. Provided by ProQuest LLC. All Rights Reserved.
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