By LYNN LOFTON
The election has turned the mortgage industry upside down with very quick movement to higher interest rates – an increase of at least .5 percent in just a week’s period of time, said Joe W. McNeese III, president of the mortgage division, Community Bank, Brandon.
McNeese said mortgage rates tend to follow what the bond market is doing. This recent presidential election was different from anything ever seen, and McNeese said markets hate any type of uncertainty. There can be a tendency to move into bonds because there is some safety there.
McNeese said right after the election returns, the stock market was getting hammered in the future’s markets. Investments were moving over to bonds, which is typically is a good thing for lower mortgage rates. But while Wednesday morning started with a big selloff in the stock market, a couple hours into the day, the stock market did a 180-degree turn and rallied.
“I have yet to read a good explanation of what happened,” McNeese said. “We have seen that trend happen every day since the election. The bond market was getting hit as people moved money out of bonds into the stock market. I personally think what we are seeing right now is somewhat a reactionary situation. No one really knows what a Trump presidency will mean to the economy. But for some reason, the traders are seeing this as a positive move.”
McNeese said in the past 30 years, there have only been two or three times mortgage rates increased so quickly.
“Normally, it is a much more gradual type process when they move up,” he said. “There has been a lot of emotional trading that is happening, and my personal opinion is things will settle down a little bit and cooler heads will prevail.”
NcNeese said he thinks we have seen the bottom of mortgage rates. He said rates could go down slightly when things settle down, maybe to 3.75 percent. But he doesn’t expect to see 3.5 percent again any time soon.
“But interest rates are still incredibly low compared to the past 40 years,” McNeese said. “As the Trump Administration gets things together, we will begin to see some economic growth and will probably see a slight increase in our mortgage rates. Long term over the next couple of years, I think what we will see more growth in the economy, and I think rates will remain steady.”
Community Bank saw record months in August and September for mortgage activity. They have seen a bit of a slowdown recently, but that often happens as people focus on the holidays.
McNeese said when the country starts to see some economic growth, more people who have been sitting on the sidelines will be likely to be more confident of their own personal financial situations and move into the home buying market.
Rhonda Newell, Southern Bancorp’s city president in Madison, said she believes the increase in mortgage rates since the election is mostly due to a feeling of uncertainty about the incoming administration which may stabilize once that uncertainty diminishes.
Newell said it seems like the workload for mortgage increases every year, due in large part to new layers being added to the process.
“Right about the time you get a handle on the existing paperwork and regulations, a new change will appear like clockwork,” she said. “But it’s nothing that we can’t handle. That’s part of the job. The increase in regulation over the past several years has had a direct impact on our workload and the amount of paperwork we handle. Customers are often shocked by the size of their paper files for a secondary market loan. And, of course, that increased amount of paperwork also translates into an increased amount of time ensuring that the customer understands the process. It’s hard to get everything done during the workday, which is why most of us work long hours and often take texts, emails or calls from customers at all hours of the night.”
Newell said being on call pretty much 24/7 can be tough, but they all have their outlets for reducing stress. “I know that many of my colleagues exercise daily to help manage stress levels,” she said.
Renasant Mortgage Production Manager Scott Garner said they are continuing to see borrowers combining their first and second mortgages and lines of credit to have one mortgage.
“Any news indicating and speculating that rates are on the rise creates a sense of urgency to those borrowers who have not yet taken advantage of the historically low rate environment many borrowers have been enjoying,” Garner said.
Garner said the volatility of rates can very much impact mortgage consumer demand, thus mortgage bankers, just like any sales-based profession, must be ready to put in the extra effort when consumers are moving on their mortgages, whether their action is rate driven or life-stage driven.
“And mortgage lenders must take advantage of the opportunity while rates and conditions are pushing more consumers to close and or refinance their mortgage loans,” Garner said. “In addition, the non-customer contact positions, such as processors and underwriters, play a key part in the success of any mortgage banker’s ability to serve his or her clients. As in any line of business, the better the team, the better positioned they are to do well in an advantageous rate environment.”
Garner agrees the amount of paperwork needed for real estate sales continues to grow.
“One would almost have to work in the mortgage industry to understand the volume and effort it takes when it comes to documenting files to satisfy today’s compliance standards,” Garner said. “With the ever-increasing focus on compliance, consistency in all loan applications for everyone in the banking and mortgage industry is going to be under the microscope. This, along with advancements in technology, will probably lead to more automated-type compliance than has been available the past.”
There is also a trend to do more of the paperwork electronically. About 60 percent of the Renasant applications are taken online, although due to the increased regulatory requirements, it has tapered off a little. And although the regulatory and documentation burden has increased for both the lender and lendee, technology has helped for providing a faster and more convenient means of collecting information, Garner said.
Rising interest rates may cause some home buyer prospects to move a little fast, said Scott Dickey, president of BancorpSouth Mortgage.
BancorpSouth has seen strong demand for mortgages this year.
“The workload has been heavy all year as this has been the largest purchase market since pre-financial crisis, with anticipation of an even stronger purchase market in 2017,” Dickey said “Interest rates are still low relative to historical interest rates
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