Say what you will about stock market crashes, but the latest carnage in equities is causing mortgage application volumes to spike—by as much as 30% at some shops.
“A few nights ago I was ready to slit my wrists,” joked Rick Thompson, president of Envoy Mortgage, Houston, a retail nonbank lender. “Then bang. We're busy.”
Envoy, though, is in the enviable position of being market-share-heavy in Texas, a state with a strong energy industry and a place where home values never boomed during the go-go years of housing, and therefore never busted.
Thompson is obviously jesting about the “few nights ago” comment. Although rates tanked in the wake of the debt ceiling deal/stock market carnage, business was already picking up in late June and into July at Envoy. Then the yield on the benchmark 10-year Treasury bond fell and suddenly lenders from coast to coast began to notice a huge increase from mortgagors wanting to refinance.
“Most of the activity we're seeing is refis,” said the Envoy chief.
The nonbank lender is now projecting total loan production of $1.75 billion this year, just shy of what it funded in 2010.
Of course rates can change on a dime and there's no guarantee that application volumes will continue robust through the fall.
“A lot of the new [refi] applications we're seeing are from people who refied after early 2009,” said Bill Dallas, president of Skyline Financial, Agoura Hills, Calif.
“We've seen a huge pickup in apps from people who were in a 30-year loan and now want a 10-year.”
A residential finance professional since 1979, Dallas admits that he has never in his life seen mortgage rates this low. “This is truly unbelievable,” he said. “Who would've guessed this would've happened?”
Early last week when Standard & Poor's downgraded the nation's credit rating it was assumed that investors would dump Treasuries and the yield would rise, causing an increase in mortgage rates as well.
But just the opposite happened—and even though Fannie Mae and Freddie Mac were downgraded, it didn't cause the spread between Treasuries and agency MBS to move a whole lot. In short: mortgage rates tumbled.
The yield on the 10-year had been slowly drifting down for weeks anyway, but when stocks swooned, so did rates.
One loan officer who works in the Northeast reported that after he sent out a newsletter to potential customers he received six leads in two hours.
David Zitting, CEO of Primary Residential Mortgage, said applications at his shop are up 30% over the past five days. “We anticipate this to continue for the next few weeks.”
Other lenders are reporting strong inflows as well but in varying degrees. “We haven't seen a big pickup in apps but activity remains very steady,” said Craig Cole, a mortgage production executive at Union Bank, San Francisco. “Our advance locks—apps not yet submitted—has been steadily increasing the last few business days.” (Union is one of the largest jumbo lenders in the U.S.)
Meanwhile, there is a school of thought out there that suggests this refi boom/mini refi boom is a major opportunity for small- and medium-sized funders to steal share away from the megabanks, especially top-ranked lenders that gutted their loan processing units in the spring to save money.
One LO for a top five ranked lender told National Mortgage News that his company is not slashing rates as quickly as some of its competitors. When asked why, he replied that mortgage executives there “want to slow production down because of capacity issues processing it.”
