When I wrote my blog posts of May 23rd and May 30th, little did we know what was headed for us? Volatility is one thing, but hundreds of basis points in hours are really something else. For those of you that had already had conversations with your clients and your referral partners some of the sting was diverted, but nobody was fully prepared for what took place.
While we will all try to figure out the reasons, the reality is we need to take positive action. We need to look at this situation and be ready to be the mortgage professionals we need to be. Most of all we all need to remain calm. Creating panic is never a good thing and certainly not what you are paid for. We need a simple and straight forward action plan.
First we need to get in front of the facts and know where to show information. First stop I think we need to look at is the Freddie Mac site and their table of historic loan rates over the last 30 years. You can find it at: http://www.freddiemac.com/pmms/pmms30.htm
This will give you a good historical view of 30 year fixed rate mortgages and the rates that were available. You will note that for quite a few years we were solidly between 5% and 8%. Sure, we can go back and find many years of double digit rates, but we have both highs and lows to deal with. We can all agree that 3.25% on a 30 year fixed rate loan was well below anything we would call average. We can certainly see that 5% certainly doesn’t qualify as “high” under any circumstances.
Mortgage backed securities like the FNMA 30- 3.5% yield went from a price of 106.5 on May 1st of this year, to closing yesterday, June 26th at 100.72. And that is up 78bps from the prior day’s trading! That is a really long way from the September 27th 2012 high of 107.5.
As rates have moved up, you need to get this information into the hands of people that need to know this and provide a plan of action.
1) Call everyone you have pre-approved in the last 90 days and update their numbers and share with them options.
2) Get in touch with your Realtor® referral partners and share with them this information so they can take positive action:
a) Call all their clients and have them re-certify their preapprovals and discuss options
b) Call all of their deals that are in contract that are set to close in the next 7 to 45 days and be sure that have a signed and dated lock agreement with their lender.
c) If they have any questions or concerns, they need to call their lender right away.
d) If they don’t get an immediate response, have them call YOU!
We have plenty of great options. Obviously if the client can afford the higher payment, then there is not an issue. If they no longer qualify, they may very well still find mortgage options that will work. We still have 3/1 – 5/1 – 7/1 ARMS that will fill the bill, or even pulling money from an IRA or getting a gift to lower the loan amount so they payment falls in line with their income. There are plenty of options. However, not sharing the news isn’t one of them! Bad news is like a dead fish, it doesn’t get better with age! Get out in front of it!
Unfortunately there will be people who are unaware of market conditions, people who are floating, or who think they are locked but aren’t. I am sure we will all hear stories in the days and weeks to come about lenders who may not have acted in good faith or reneged on their commitments to their clients. It will happen. It just can’t happen to those you work with!
Nobody likes to pay more money for something than they could have. Nobody likes when the cost of anything goes up. However, mortgage loans still are a great deal! Home values are growing stronger and owning a home is still a better option than renting in most of the country. We just need to share the information and have a solid strategy on what to do and how to do it. Take control and earn the respect and business of the people you help through this jump in mortgage rates.
Questions or comments please email mike@IMTCoaching.com or visit our website: www.improvemytomorrowcoaching.com and please “LIKE” us on Facebook® https://www.facebook.com/ImproveMyTomorrowCoaching