By Lindsay Clark, Director of Insights
The mortgage industry looks a little different today than it did one year ago. According to recent articles from CNBC, the latest inflation rate is 9.1%, and mortgage interest rates have risen to nearly 6% for 30-year fixed loans. Implications of higher rates can mean diminished refinance demand and a decline in new purchase loans. Mortgage companies are executing a variety of strategies to adjust to current market conditions and volatility. While some wholesale lenders have shuttered business (Sprout) or scaled back labor (loanDepot, Newrez), others have focused on supporting and relying on their loan officers, brokers, and partners as margins tighten.
Highlighting ARM Pricing As refinance demand dries out, mortgage firms have instructed their partners to hone in on purchase loans. Marketing these loans with ARM pricing has been an added strategy for wholesalers and retail lenders. Familiarizing the Borrower Unfamiliarity surrounding ARM products has influenced lenders to adjust how they execute standard home loan campaigns, where typically a low rate on a 30-year fixed term is the primary incentive for a homebuyer. For this reason, it is essential that marketers familiarize borrowers with the benefits offered by ARMs. For example, a recent email from Space Coast Credit Union noted several benefits of ARMs in an easy-to-read bulleted layout. Additionally, the credit union provided a link to their website where prospective borrowers could read an even more comprehensive guide. Another lender, PennyMac, executed a campaign that illuminated ARM products and more specifically, their new Fixed Period ARM with positive messaging like “discover what’s possible” and “potential benefits of ARM refinancing.” Meanwhile, a Better Mortgage newsletter took a similar approach to discussing ARMs. The lender headlined its email with “Rising interest rates make ARMs an attractive option” and noted that most homeowners typically sell or refinance anyway within 7-10 years which makes an ARM product appealing.
Pushing the Broker In a July update to its partners, United Wholesale Mortgage’s CEO noted that with rent going up, homebuying and purchase loans are still in demand. While the majority of homebuyers prefer a fixed rate option, UWM’s CEO urged brokers to still offer and inform clients on the availability of ARM products. Among wholesale lending marketing, Competiscan has already seen a 20% increase in communications that highlight ARMS in July compared to June. Numerous ARM options on conventional and notably jumbo products have been promoted. ARMs with 5/6, 7/6 and 10/6 options have been highlighted from loanDepot, First Guaranty Mortgage Corporation, Homebridge, and Ameris Bank. In general, wholesalers are keen on providing their partners with ample and diverse product portfolios. While conventional products may meet the needs of most borrowers, reaching the most unique homebuyer with a non-QM product is just as important in today’s environment.
ARM Marketing is Here to Stay According to Redfin, home prices have not dropped despite rising interest rates and a significant decrease year-over-year in homebuying demand. The Fed is likely to raise interest rates at least two more times in 2022, and an announcement of the next increase may come as soon as this week. Consequently, home prices might finally drop, but with even higher borrowing rates, ARM offerings and marketing are likely to continue to be highlighted from lenders.