The top three things every lender needs to consider when it comes to tackling low mortgage rates

It’s no secret that things are out of the ordinary right now. The global coronavirus pandemic has fundamentally changed how we live, how we work, and the world that we live in.

Mortgage rates have been no different. HousingWire reported that United Wholesale Mortgage was rolling out 30-year fixed rate mortgages at an all-time low of 1.99% at the beginning of the month. Though the average US mortgage rate has been hovering around a 3% rate —we’ve seen a significant number of lenders—fall sharply below the national average. This is in addition to the fact that July of 2020 had the highest rate of home sales since 2006.

With interest rates being at an all time low, the effect on lenders has been nothing short of mayhem—and as consumers are furiously applying for mortgages or refinancing to take advantage of rates— lenders everywhere have been overwhelmed with the onslaught—and the risk.

For many lenders, leaving loans on the table—and losing out on possible profits have been the path for many. Others have considered raising their rates in order to mitigate the endless stream of paperwork—but put themselves in high risk of being uncompetitive in a volatile market.

But what is a lender to do? And how does a lender effectively deal with a market that seems to be changing every minute?

We take a closer look at the top three things all lenders should do to combat the deluge of mortgage and refinancing applications, how to protect themselves from bad underwriting, and how to take advantage of the market so that they come on top.

Outsource your verifications

As everyone knows, completing verifications often feel like pulling teeth. The process is time-consuming, difficult to manage, and takes your focus away from the things that matter.

Outsourcing to an outside source is a smart step to take—particularly in times where your team is inundated with requests.

Here’s the simple reason why: scalability is everything. When you outsource your verifications to an outside source, you’ll be able to have the customized help you need on-demand. This is a game-changer because when you work with a verification partner—like Truework—they’ll be able to assess the manpower you need and adjust accordingly as the market—and your needs fluctuate.

Flexibility, especially in an ever-changing environment is the key between those who can successfully navigate the uncharted terrain that currently exists, and those who can’t. We’ve seen this first-hand at Truework. Since the beginning of the COVID-19 pandemic, our no-provider completion rate has seen a 77 percent increase—from 45 percent completed to 85 percent completed.

What we’ve seen at our own organization is that flexibility gives you the same benefit as hiring extra hands and eliminates the hassle of hiring, onboarding, and managing extra employees. Furthermore, if regulations were to tighten up or something drastically changes with demand—you won’t be locked into having extra employees—and their extra salaries and benefits—with nothing to do. Simply put, outsourcing is a smart financial move.

At Truework, we’ve built out a dedicated team of highly trained mortgage industry professionals with this in mind. Our team is committed to tackling and completing your VOE/VOI request (whether manual or instant)—so you can close your loans faster than ever. Click here to learn more.

Be selective

It’s easy in chaotic moments to get swept up— and feel the pressure to accept and tackle every mortgage application that comes your way.

Focusing on quality over quantity is the single most important thing a lender could do right now. In such uncertain economic times, it’s imperative that you’re lending out to those you know to be reputable.

When you can’t even get to a loan for four or more days, you want to know that there will be high return on your effort and resources, and not only ensure that the mortgages you give out will be solid—but that you can effectively manage the stream of applications coming in.

The key to being selective is all about timing—and automatic gating. By doing so you can be sure to maximize yield and take advantage of the windfall of applications while ensuring that loans close on time.

Before anything even comes through—it’s imperative that the applicant has already applied online and has met criteria that justifies them as a qualified candidate to lend to. Some key things lenders should look out for include:

• Exemplary credit scores: Where sub-700 credit scores may have still provided an avenue for borrowers to access a mortgage or a refi—when you need to guarantee that this particular applicant will be good for their money—particularly in such shaky economic times— it’s imperative to put high stock in a 700 or above credit score. For context, in April, JP Morgan Chase “tightened it’s standards... requiring borrowers to have minimum credit scores of 700,” according to Fortune Magazine. Wells Fargo has taken a similar route, requiring borrowers to have a minimum credit score of 680.
• Ability to pay larger down payments: The best peace-of-mind a lender can have that they won’t lose money, is that they aren’t lending out as much money to a borrower. Be sure to set minimums not only as protection, but as more proof that your borrower is capable of paying back their loan.

Ultimately, tailoring your criteria for borrowers to what best serves your needs and what protects yours—and your borrowers’—interest is the most important, and having that upfront will ensure that your time isn’t wasted, and your money is protected.

Keep yourself informed

Lastly, when the news changes so rapidly—knowing what to do and how to keep informed feels impossible. Here’s a few resources that we’ve found to be great sources of news and information for mortgage lenders everywhere:

• Rob Chrisman blog and newsletter: As an industry veteran of over 35 years, Rob Chrisman—and his blog and daily newsletter—is a great, analytical way to assess what’s happening in the world of mortgage lending each day.
• MBA Weekly Applications Survey: The MBA Weekly Applications Survey is a comprehensive and up-to-date look at what is happening in the mortgage industry. Especially in times that are particularly volatile, the MBA Weekly Applications Survey is a great resource to keep on top of what is going on.
• Truework Knowledge Center: At Truework we’ve built out our Knowledge Center with the intention to provide you with relevant insight and guidance on every question or pain point you might have as a lender. We’re adding new content on a regular cadence, so be sure to check back regularly.