Interest rates are going up faster than expected, United Wholesale Mortgage CEO Mat Ishbia said in his latest 3 points video that was posted last Friday. What does the industry giant recommend its brokers do? Diversify, take advantage of money saving programs for borrowers, and wait for the market to change.
“Are rate and term refinances dead? They’ll probably be dead for a while,” Ishbia said. “But, can you do cash-outs? Yes. Can you look at adjustable rate mortgages? Yes.” Ishbia also encourages UWM’s broker partners to look at non-QM and jumbo loans to “figure out how to win in the new normal.”
As the industry shifts into doing a purchase market, brokers will need to diversify their lead flow and their loan products, Ishbia says, while recommending partners to advertise through mailers, TV, past clients, and real estate agents.
“Some loan officers are going to get scared and others are going to thrive,” Ishbia said. “In the first quarter of 2022, a lot of houses were on the market and they got gobbled up really quick, whether it was by people bidding or overbidding. Big-time investors coming in, too, as in big corporate companies.”
Ishbia also mentions that with the rise of interest rates and inflation, affordability has changed for first time home buyers. Instead of buying a $300,000 house with 2.75% interest rate, borrowers have to pay 4.5%, which is a significant differentiator. But, there are still 5%, 10%, and 20% down payment programs that brokers can take advantage of, according to Ishbia.
“I think the purchase market is going to be strong though the second and third quarter, but I don’t think it’s going to be 7 bids or 8 bids over the asking price all the way through the end of the third quarter into the fourth quarter,” Ishbia said.
As supply and demand dynamics change, rates steadily increase, affordability changes, and big investors come in to buy up homes, Ishbia assures his partners that competition will eventually die down and these supply issues will not last for too long.
“Don’t think that it's going to be a market where there’s no inventory forever,” Ishbia said. “That’s going to change. We’re starting to see that ease up already… so, by the second or third quarter it’s going to be back to hopefully a more normalized purchase market in the United States.”
The last point Ishbia makes in his video is about the Fannie Mae guideline changes and how it will help brokers in a tougher housing market.
On March 19, 2022, Fannie Mae made an improvement to start matching Freddie Mac’s guidance on funds to close for refinance transactions. In April of 2021, Freddie Mac announced that if closing costs are less than $500, brokers and borrowers will not be required to verify those funds, and now Fannie Mae is doing the same. Ishbia tells his audience this means Fannie Mae and Freddie Mac are trying to make conditions more favorable to consumers, and thus more favorable to mortgage industry professionals.
