It looks like the markets are looking to make a run. We have two significant things to watch and both are close to letting the market go into rally mode. First, we have the FNMA 3.5% closing at 105.44. This is just four basis points off the 105.48 ceiling of resistance. A break above and a close above that level could really support a significant rally. The second area to watch has already broken a significant milestone, the 10 year UST has closed below 1.78 at 1.72. A further drop in this key market could really help fuel lower mortgage rates. I share this with you because it is significant and you need to at least have awareness as to what is happening. With pressure on rates to go still lower, you need to keep alert because things can change rapidly.
While this news will continue to put pressure on loan originators to spend a great deal of time working refinances, I urge you to use caution and remain committed to your purchase loan referral partners and those who would benefit from buying not refinancing. You also need to work with your Realtor® referral partners to be sure that everyone they are working with has recertified their preapprovals for value if those preapprovals were issued prior to 1/15/15 because with rates falling, people are now likely to qualify for more money than they thought, in some cases, it may be significant if they were shopping with a FHA loan in mind using a higher rate and higher MIP costs.
Remember, refinances are largely built on price alone. Without a contractual obligation to close a loan, people refinancing can often shop a large number of places and receive a wide range of information, some of which may be quite suspect to say the least, and out and out lies to say the most. And if rates fall further and quickly, you may end up with a bunch of files that don’t close or rescind; or worse, pay off early at a still lower rate! You can’t afford either of those so keep focused on what the customer is saying and remember; sometimes the best refinance is a sale and purchase of a new home, a forever home!
Now is also a good time to look through your past preapprovals that didn’t find a home and engage in a conversation about what they might be able to buy using today’s lower rates. Sometimes that perfect house was just ten or twenty thousand dollars above where they we able to buy. Well, in today’s market, they have a great deal more purchasing power!
You also might want to ask your Realtors® to go through their records and see who they were working with that didn’t buy or sell and reengage that conversation! They can also look back to see who purchased a home using the old FHA MIP program or for people who might have bought four years ago or more, who now would have some equity in their current homes as well as also qualifying for a much larger loan, using the same monthly payment. What kind of home could they trade up for with approximately the same monthly payment?
You don’t know if these strategies will work with your agents or in your market if you don’t try. What could it hurt to make a small effort? It might find you some loans, it might find you a few listings and buyers for your Realtors®; and it might create a few new referrals and referral partners! You won’t know if you don’t make the effort.
Questions or comments: Mike@IMTcoaching.com