The weather isn’t the only spring-like occurrence in Clark County this year; the mortgage industry has enjoyed business reminiscent of sunnier days thus far in 2015, and that’s been a good thing for local lenders.
“In Clark County we have seen about a 50 percent increase in the mortgage application pace over January and February 2014,” said Joey Lai, Wells Fargo Home Mortgage area sales manager for Clark County.
“Since January 1, we have been really busy,” shared the President of Creekside Mortgage, Kerry Greenwald. “We have exceeded … doubled our expectations.”
According to Lai, the increased business has allowed Wells Fargo Home Mortgage to recruit and hire more mortgage loan officers and support staff.
“Spring coming a little earlier for the mortgage industry definitely created some more business,” added Jody White, loan originator for Academy Mortgage. “It kept us on our toes, requiring us to deliver clean files so that we could maintain our 48-hour underwriting turnaround throughout the upswing.”
“With such a low pipeline in 2014 to now being inundated, it’s a good problem to have,” said Riverview Community Bank Mortgage Specialist Derek Christina.
Where did this flux of new mortgages in Clark County come from? Christina sees the low rates, still low home prices and somewhat more stability in the job market as keys to buyers coming into the market. In fact, he thinks with the fast start, 2015 could be one of the best years in the industry in a long time.
White cites a “nice little inventory” bump of houses as a factor in the upswing. And perhaps the weather did play a part.
As mortgage rates flirt with new all-time lows, different lenders manage their business in different ways. For instance, White said she is unfazed by maneuvering profitability when rates are low.
“We’re not paid on the backside or type of loan [at Academy Mortgage],” she said.
Specializing in government and VA loans (making up 80 percent of his business), Greenwald is undaunted as well.
“No matter what the rate, we get paid the same transaction-based flat fee,” he said.
Riverview has a different model, diversifying the loan types they offer. Like Creekside Mortgage, Riverview brokers mortgages for a flat fee through USDA, VA and FHA loans.
“We also work with Freddie Mac,” said Christina. “Customers get low rates while working with local, hometown brokers but benefit from low interest rates and we have reduced risk.”
As for their owned portfolio, Christina said that in order to manage a time of such low rates, “We have had to install floors to enact when needed.”
“When the mortgage interest rates go down, typically our cost of funds to lend is low as well,” Lai added. “It is also important for us as a company to maintain cost control disciplines during these times to ensure profitability.”
With the start of the year’s volume flying in the face of what is typically a slower time in the industry, the low interest rate environment has Lai thinking 2015 could be a successful year for everyone with a stake in the real estate game.
“I am general realist, but this looks like a fantastic year, and quite frankly, we need it,” Christina agreed.
There are obstacles to the industry continuing its current trajectory. Greenwald and White are concerned about the depth of inventory being lean for first-time home buyers and those seeking homes under the $250,000 price range. They see customers struggling to buy homes in their price range, bolstered by low rates and exacerbated when inventory
Another obstacle is inevitable, Greenwald states.
“We are all waiting for the uptick in [interest] rates. It has been 30 years of dropping to historical lows. When that [uptick] happens, how home values affect the market, that is the unknown,” he said.
“I think rates will stay low awhile longer before they rise with demand in the summer months,” White opined. She also sees inventory increasing back to a six-month pool versus the current three month availability, though buyers desiring new construction are lacking abundant options.
Overall, the mortgage market still looks strong for local lenders. As in any era, consumer insight is a key to transactional success. White concluded that buyers as consumers are more educated these days, but warns of “mis-education” as well.
“It’s tough when buyers come in expecting to get the rates they see advertised,” she said. “There are so many variables that come into play – the percentage they have to put down, credit scores (real versus perceived), home value versus price. It is difficult to get the absolute lowest rate.”
“You have to set proper expectations,” Christina added. “Regulations [and] the market are always changing.”
For 2015, the industry is preparing for changes in real estate documentation and processes mandated by the Dodd-Frank Act which are to be implemented later this year. Mortgage lenders like Riverview have been preparing for the changes well in advance so that their delivery to customers will remain a positive experience.
“In the end,” Christina concluded, “customers really want help finding the best rate.”