Interest rates are rising faster than expected, United Wholesale Mortgage CEO Mat Ishbia said in his latest 3 point video which was released last Friday. What does the industry giant recommend its brokers do? Diversify, take advantage of savings programs for borrowers, and wait for the market to change.
“Are interest rate and term refinancing dead? They will probably be dead for a while,” Ishbia said. “But, can you make withdrawals? Yes. Can you look at adjustable rate mortgages? Yes.” Ishbia also encourages UWM partner brokers to review non-QM and jumbo loans to “discover how to win in the new normal.”
As the industry shifts to a buy market, brokers will need to diversify their lead flow and lending products, Ishbia says, while recommending partners advertise via direct mail, TV, former clients and real estate agents.
“Some loan officers are going to be scared and some are going to thrive,” Ishbia said. “In the first quarter of 2022, a lot of houses were on the market and they were gobbled up very quickly, whether by auctions or overbids. The big investors are coming in too, like in the big companies.
Ishbia also mentions that with rising interest rates and inflation, affordability has changed for first-time home buyers. Instead of buying a $300,000 home with an interest rate of 2.75%, borrowers have to pay 4.5%, which is a big differentiator. But, according to Ishbia, there are still 5%, 10%, and 20% down payment programs that brokers can take advantage of.
“I think the buying market is going to be strong through the second and third quarters, but I don’t think there will be 7 offers or 8 offers above the asking price throughout the end of the third quarter. until the fourth quarter,” Ishbia said.
As supply and demand dynamics shift, rates steadily increase, affordability shifts, and big investors come in to buy homes, Ishbia assures its partners that the competition will eventually die down and that these supply problems will not last too long.
“Don’t think this will be a market where there won’t be any stock forever,” Ishbia said. “That will change. We’re already starting to see that subside…so by Q2 or Q3, hopefully the buying market will be back in the US.
The final point raised by Ishbia in her video concerns changes to Fannie Mae’s guidelines and how they will help brokers in a tougher housing market.
On March 19, 2022, Fannie Mae made an improvement to begin following Freddie Mac’s advice on which funds to close for refinance transactions. In April 2021, Freddie Mac announced that if closing costs are less than $500, brokers and borrowers won’t be required to verify those funds, and now Fannie Mae is doing the same. Isbia tells his audience that this means Fannie Mae and Freddie Mac are trying to make the terms more favorable to consumers, and therefore more favorable to professionals in the mortgage industry.