An Old Friend Back in the House: Adjustable Mortgages on the Rise
A mortgage product introduced to take advantage of a declining rate environment is seeing new interest even as rates rise.
Mortgage Harmony Corp. reports its "HarmonyLoan" product is now making adjustable-rate mortgages attractive again.
Robert Catalanotto, chief operating officer and co-founder of Mortgage Harmony along with CEO Keith Kelly, told Credit Union Journal more homeowners are again expressing interest in ARMs.
"In a low-rate market, which we have been in for some time, it was difficult for an ARM product to penetrate the fixed-rate preference," he noted. "What is happening now is the market is changing to an ARM market, making our product more attractive. If someone has a 5/1 ARM and the homeowner is getting close to the reset time and is worried rates are going up, they can reset."
That "reset" feature was a key sales feature when the HarmonyLoan was initially introduced. In recent years as mortgage rates continued to decline, the product allowed the borrower to reset their loan rate without having to go through the time and expense of refinancing. Catalanotto noted borrowers also have the option of extending their loan term.
"This gives consumers the equivalent to a no-closing-costs rate," he said. "That loan gets more from investors. The HarmonyLoan is an interest rate that is close to that rate. When someone clicks the button to reset their interest rate it does not restart the loan frame. If the homeowner is five years in, it does not start over with a 30-year loan."
The HarmonyLoan consumer product is one aspect of what the company does, Catalanotto continued, adding the company helps "manage" the loan for the consumer and the institution.
"If a person has a HarmonyLoan and logs in to our website, they can see a comparison of current loan specs to the HarmonyLoan offer of the day. They can see if they qualify to save money."
The FI gets loan retention software from Mortgage Harmony, he stated, noting although an FI's No. 1 asset is a loan, there are very few tools to protect that asset.
"About 70% of loans originate through correspondent lending," he said. "The model is inefficient, and we bring a more efficient process that helps institutions keep more of the loans they have so they can use their resources to get more loans."
Mortgage Harmony currently is working with CUMA, a CUSO in Fairfax, Va. Catalanotto said approximately 15 of its members are signed up to offer HarmonyLoans. In January the company announced a pair of partnerships that will help it expand, an alliance with LenderLive Network and $1.6 billion GTE Financial, Tampa, Fla. GTE Financial is offering it on both mortgages and auto loans.
"This is a very competitive space, with a lot of institutions stealing loans from each other," Catalanotto observed. "We are very happy GTE Financial is offering the HarmonyLoan feature on its auto loans."