Refis, Refis: How to Handle Them in a Fluxuating Market David M. Devlinrefis, market, finance
The refi boom is still going strong. We saw rates dive in
mid-November, only to watch them shoot back up again in early
December, and many borrowers are scurrying to close their loans as
fast as possible. The economy is showing no signs of immediate
recovery, holiday retail sales are lower than in recent years, and
the Federal Reserve continues at hint at further interest rate
cuts.
Experienced brokers have seen markets like this before, and know
how fast they can dry up. So what wisdom can the veterans impart
upon our less-experienced associates?
++Be Realistic About Timeframes--Don't tell clients that you can
deliver in two weeks, when it is not possible; you will only end up
with unhappy customers. With appraisals taking anywhere from
two-and-a-half to four weeks and underwriting lasting between seven
and 10 days, tell your borrower that the process may take up to 60
days. It will alleviate some of your pressure, and provide your
client with a sense of confidence, when you deliver the loan in a
realistic timeframe.
++Gain A Financial Commitment--Ask your client to pay for
appraisal and credit report fees at the application phase. You are
going to invest your time in working on the client's loan request,
but have no guarantee that you will ever be paid. In this kind of
market, borrowers have more of a tendency to double-app brokers. In
the past I have made the mistake of forgoing the financial
commitment at the beginning of the loan process, and have
consequently absorbed my fair share of appraisal, credit report,
and condo certification fees.
++Do Not Hold Out For The Last 1/8 Percent--Many borrowers will
ask you to predict the bottom of the market. At the beginning of
the loan process, consult with the client about a target rate and
price, but explain that no one can possibly know where the bottom
will actually end up. Gain a commitment to lock, and close when the
market is either at the target or within a range that will be
acceptable to the client. Don't be greedy and hold out for that
extra fraction. That's when your extra profit can turn sour, as you
are forced to honor your rate lock commitment.
++Honor Your Loan Delivery Commitment--Remember, your lender
took the risk of increasing rates when you were given a rate lock
commitment, and we all know that a loan cannot be delivered after
cancellation or double app-ing. When brokers lock several sources
with no intention of delivering a loan, both the lender and the
reputation of the broker community are damaged.
++Utilize Past Clients--As your phone rings with opportunities
to create new lifelong clients, don't forget that your best
referral source is a satisfied client base. I have sometimes made
the mistake of putting new clients before my existing refinancing
customers, only to later find out that they went to another broker.
Remember: people will only remain loyal for as long they're
interested.
++Stay Relationship Oriented--Each client can be worth thousands
of dollars in income from referrals and refinancing. Get your
client the best loan for them, not the loan that will give you the
highest immediate return. Turn each opportunity into a lifelong
commitment.
