Redeployment of Refinancing Resources on the Rise

The distressful days of refinancing are over. Nationwide mortgage rates finally climbed out of
the historic depression that made refinancing mandatory for every other homeowner, even for the
homeowners who refinanced previously for lower rates and more flexible terms than before.
Lenders point out a significant decline (as much as 40%) in refinancing applications due to the
increase in the mortgage rates. Although, some of the traditional refinancing parameters remain
as they are (debt consolidation, divorces, college tuitions, home improvements, and financial
goals not driven by interest rates), yet the trend is overall on a decline.

For the loan officers or mortgage loan originators in the refinancing business the profit arose
from paid commissions of refinancing. When there is no salary safety net, no income, and no
closings, there is also no income. A 40% decline in the mortgage industry means that the
refinancing business is also down by 40%. This can be difficult to accept for the loan officers.

The loan originators are essential mortgage salesmen, and they received training to identify and
develop new mortgage markets. When refinancing rate declines, the only business to concentrate
upon is the purchasing of new homes. However, mortgage refinancing is easier than the
mortgage on purchasing a new home. The major difference is that the refinancing officer finds
you out, whereas in case of purchase mortgage, you have to find out the lender. At this stage,
stuff begins to get murky.

Understanding the concept of pipeline mix is also important. This refers to the ratio of purchase
mortgage loans to the refinancing mortgage loans. Loans at all stages come into consideration
(closed and active), so pipeline mix ratio can provide a good estimate of the status of the housing
market. The loan officers who have a high percentage of purchase loans in the pipeline typically
depend on a network of referrals for sourcing their businesses. Even in the rising interest
markets, these networks have the potential to generate purchase mortgage referrals.

However, for loan originators who have a high amount of refinancing loan applications in the
pipeline, the network of referral sources are difficult to find. Therefore, with the fading of the
refinancing business, the loan officers are left to try new markets, trying to purchase businesses
from the established businesses of competing loan originators. This poses a huge difficulty for
the RO. Competitive ROs may not be collaborative unless you can provide them with the
prospects of a good deal.