There is still ample opportunity in the market for lenders to rope in refi business, according to a quarterly report published Monday by Sales Boomerang. And the reason for this is two-fold.
The report – which is compiled using data sourced from more than 150 residential mortgage lenders – found that one in 12 borrowers saw “significant home equity growth” in the third quarter.
Plus, the frequency of borrowers searching for the phrase “cash-out” increased by almost 300% from Q2 to Q3. The behavioral data analytics firm says these developments point to the fact that “borrowers have grown their credit scores alongside their equity, paving the way for more cash-out refinance and HELOC activity in the coming months.”
Additionally, there was a 34% increase in consumers searching for “rate-and-term” in the third quarter, showing a continued interest in getting a refi, Sales Boomerang said in its report.
However, the company also noted that the refi opportunities still out there are not low-hanging fruit and will require lenders “to be proactive in reaching out to potential refi customers, as many eligible customers do not appear to be shopping for rates on their own.”
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While the recent movements in interest rates may provide some additional refinancing volume and an ability to take another bite at the apple, rates will undoubtedly rise in the coming years. The industry knows this and is looking for ways to increase profitability while preserving origination volume optionality.
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Sales Boomerang concluded this based on the decline in customers looking up mortgage information (5.27%, down 10.22% from Q2) and early pay offs (2.23%, down 8.23% from Q2).
The analytics vendor also threw a bit of a wrench at predictions voiced by market experts that a home purchase boom is imminent in late 2021, with the firm finding a 24% quarter-over-quarter dip in “new listing” alerts. Sales Boomerang suggested that “lenders may need to revise their year-end revenue forecasts.”
Alex Kutsishin, CEO of Sales Boomerang, said in a statement that refi activity has indeed started to slow and the purchase market “has not yet picked up the slack.”
“Still, the big-picture view says we are still in the midst of a housing boom,” he said. “Ample purchase and refinance opportunities remain, and our data intelligence points to myriad ways lenders can improve borrowers’ financial position with the right loan product.”
One of the ways for lenders to do this is by reaching out to FHA borrowers “with mortgage insurance [who] are unaware they have the option to remove their MI once they reach 20% equity,” the report said.
From Q2 to Q3 there was a 366% quarter-over-quarter increase in “FHA MI removal” alerts and “lenders have the opportunity to deliver immediate monthly savings to borrowers,” the report added.
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