Housing 2024 - What's in store for housing's next generation

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 22 of 67

Th e M Rep o RT | 21 Feature S ome like it hot. During the summer of 2014, the housing market came back, and with a vengeance. Home prices rose in 49 states compared to the previous year, and sales of existing homes rose to their highest level in nine months, making the overall housing prognosis good. By October, the average 30-year fixed mortgage rate was 4.19 percent. But along with the slight resurgence comes the specter of rising interest rates ahead. While interest rates remain low by historical standards, the Federal Reserve wants to raise its benchmark rate starting early next year. Since the Fed phased out its monthly bond-buying program in October, mortgage rates are primed to rise even further. So what should mortgage lenders do when rates rise? Forward-looking lenders are us- ing predictive data and analytics to manage the risks and opportuni- ties in this new rate environment. Products like cash-out refinances, which were highly marketable in the days of rock-bottom inter- est rates, may not be as attractive in this new environment. Other products such as second-mortgage loans and home-equity lines of credit (HELOCs) should be posi- tioned to respond accordingly. America's top mortgage origina- tors are going with a proven five- step plan for determining which of these home-equity products is right for their customers, and how to make the winning pitch to close more loans. The 5 Steps Explained Let's get down to the business of mortgage marketing. The key word to remember is education. Interest rates change constantly. Does the customer understand that several options are avail- able using equity in their home? Getting to know the customer and discovering their desires and needs, while showing them that you can fulfill those require- ments, is the key to success. Let's explore what you need to know in order to find the best loan for your customer: What mortgage rate is the customer currently paying, and have they refinanced recently? I f the customer has not re- financed in the recent past, then a traditional refinance would likely be a solid choice if they have a high rate currently. In a market with low or falling interest rates, the cash-out refi- nance is usually the go-to prod- uct. Its advantages are numerous and well-touted: cash right into the customer's pocket at a great rate and a fantastic way to both consolidate and spread out their loans over a longer period of time. So, if interest rates are on their way up, does it make sense to advise homeowners to refinance their original mortgage? Of course, a cash-out refinance would be less costly than paying interest rates of 15 percent or more on credit cards or other high-ticket debt. Unfortunately, that will increase payments on the customers' original mortgage obligation for years to come. But, as a flexible mortgage marketer, you know that other mortgage products are just right for the times. More than 13.1 million homeowners who have refinanced over the past 24 months could benefit from this type of product. How does the customer intend to use the money derived from the home-equity product? W ill the funds be used for a one-time or a longer- term expense? If it is indeed for a longer-term expense, how long will that expense last? Will the intended expense be home related and thus qualify as tax- deductible? Even though certain customers may have refinanced in the last Adjusting to the New Interest Rate Environment: The 5 Steps to Marketing Success For mortgage marketers, the combination of rising home prices and mortgage rates delivers a new set of challenges and opportunities. By Kesna Lawrence 01 02

Articles in this issue

Archives of this issue

view archives of TheMReport - Housing 2024 - What's in store for housing's next generation