With interest rates remaining at historical lows, and the Federal Reserve at a standstill on raising the federal funds target rate, now is the prime time for homeowners to refinance their home—but many are not.
Michael Reddington, EVP of Retail at Envoy Mortgage sat down with MReport to explain how lenders should handle refinance business at a time when rates are so low.
MReport: Given how low interest rates are, is there still life in the business? Recent reports have shown that there are still quite a few eligible refinancers out there that just have not taken advantage of low rates. Why are borrowers not diving in while rates are so low?
Reddington: I think borrowers with higher interest rates have already refinanced, but there are still plenty of homeowners who could benefit from today's interest rates and the increasing values in homes. There is more equity in homes these days, providing the ability to cash out at a low interest rate for home improvements. The refinance business is still out there and there are still more borrowers to reach.
MReport: What are lenders doing to reach that untouched population of eligible refinancers? What are the most popular programs for borrowers?
Reddington: The lenders that are getting that refinance business are continually staying in touch with their customers through emails and phone calls throughout the years. It's important for lenders to stay in front of the customers, educate them, and make sure that they understand that the lender is there for them and can save them money on their mortgage loans. This is the difference between companies that are bringing in that refinance business and companies that are not.
The most popular programs right now are government programs, like the FHA low money down loan, which is a very popular option particularly for first-time homebuyers. VA mortgages are another good no money down option with low rates. Conventional programs are also very popular. Mostly, it is the minimum down programs that are getting customers into homes.
At Envoy we have doubled our VA business over the same time frame from last year. We are focused on training and educating our sales force on this program through our VA boot camp program. Our loan officers are spending many hours training to become certified to make sure they understand and can offer this program to veterans. Serving veterans is a core value of Envoy Mortgage and the VA loan is very popular due to the no money down option. We do everything we can to make the entire process goes as smoothly as possible.
MReport: Are you presently seeing an increased interest among millennial borrowers compared to this time last year?
Reddington: We are definitely seeing plenty of younger buyers jumping into the housing market this spring, no question about it. I recently read in a study that about 68 percent of first-time homebuyers are millennials and one-in-three mortgage transactions are being done with millennials.
MReport: What are the differentiators for retail organization today? How important are mobile capabilities?
Reddington: Service is the biggest differentiator. Buyers are looking for personalized service and experiences, as well as 24/7 availability. Having a mobile app is certainly a great selling feature for tech-savvy millennials and customers, but it needs to be combined with high-end service and good information.
Staying in touch and the education of our customers sets us apart. Making sure we continually email or call our customer base to keep them up to speed on rates and programs, and simply thanking them for trusting us with their business makes a difference with customers. We have very good educational and marketing materials available to our loan originators that more and more customers are searching for. Providing upfront education and information creates loyalty on the part of our customers and differentiates Envoy from other lenders.