Record high home prices and rising interest rates have put pressure on the mortgage market. The Fed signaled its intention to keep interest rates higher for an extended period, confirming that neither borrowers nor originators would get a reprieve. The recent lull in refinance lending, combined with the disparity between housing supply and demand, means originators still find themselves in an increasingly competitive situation, even as expectations are that the worst is over. These market developments highlight the reality we must face: playing the interest rate waiting game is not a viable strategy. Instead, originators must proactively seek innovative ways to serve borrowers and generate business in this challenging market.
Meet your customers
With originator loan activity significantly reduced, you must integrate new products and services to grow your business and meet the needs of borrowers in the current market.
Home sales are slowing due to reduced supply and record-high prices. However, there is still a record $17 trillion in home equity on the market. Bottom line: People stay put. So how to leverage such a huge equity stake? Explore HELOCs, they come in a variety of shapes and sizes, meaning you can customize them to suit your customer base. For example, bank statement HELOCs serve individual borrowers who may not qualify for traditional products. A bank statement HELOC gives borrowers the flexibility to fund their most important endeavors, such as business investments, home improvements, and other expenses.
Additionally, rising interest rates make it more difficult for borrowers to obtain personal loans. That’s where HELOCs come in: By offering bank statement HELOCs, originators can provide valuable services that meet borrowers’ current needs, while also expanding the originator’s own business through expanded product offerings.
In addition to HELOCs, flexible, non-agency loans, such as non-QM loans, can help originators serve a wider range of borrowers. These loans are particularly beneficial to the growing number of individual borrowers who may not meet the qualifying criteria for a traditional mortgage.
By adding your experience and expertise in niche products such as HELOCs and non-institutional loans, you will have a competitive advantage over peers who insist on offering only traditional loan products.
Be proactive and stay ahead of the curve
Providing innovative products to your customers is not just for their benefit; It’s also an investment in your own growth. Sponsors take the time to become experts in niche products, allowing them to provide tailored solutions to a more diverse set of borrowers, expanding the potential reach of their practice and opening the door to long-term business growth. Keeping their finger on the pulse of borrower behavior and motivations enables originators to anticipate customer needs and stay ahead of market challenges.
Ongoing education about the product is critical for originators, and those who do not actively work to increase and improve their knowledge are at a disadvantage in meeting customer needs and standing out from their peers. Sponsors must seek out webinars, seminars, and training to enhance their understanding of new and developing products, ongoing market trends, and industry best practices. In addition to their own education, originators must be prepared to educate customers on the benefits of different loan products and how to apply certain mortgage innovations to help them achieve their goals. Educated borrowers are likely to feel confident in their financial choices, provide business recommendations, and develop a trusting relationship with the borrower.
By remaining flexible and innovative, sponsors can thrive even in a challenging interest rate environment. Remember to focus on providing value to borrowers and proactively seek out new opportunities. No matter what the market looks like, you can turn industry innovation into growth opportunities for your business.
This column does not necessarily reflect the opinions of the HousingWire editorial staff and its owners.
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