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In case you hadn’t noticed, mortgage lending volume is off about 20% from a year ago, with refinances down somewhere around 35%.
To add insult to injury, profit margins for traditional mortgage lenders reported for the fourth quarter of 2017 are less than half of that in Q4 2016; $237 versus $535.
We all knew this was coming. But, did we prepare? Those that prepare are usually the companies or teams that are “lucky” and win in the end. Did someone say, Villanova?
The good news is that the spring buying season is upon us and the purchase market looks strong. Rates are still relatively low, the economy is still improving, unemployment rates are way down, jobs are better, and wages are increasing.
The bad news is a low inventory of homes for sale. So, where might lenders pick up some additional business?
With inventory down in an improving economy, home values are rising. With this increase in value comes an increase in home equity for current homeowners.
This increased equity presents some opportunities for lenders.
Although rates are up, some homeowners are still looking to refinance. The increased equity provides them access to some new-found cash. They can tap that equity through a cash-out refinance for a number of reasons:
- Home improvements
- College
- Investments
- Pay off higher rate debts; e.g., student loans and credit cards.
Alternatively, they may choose to obtain a line of credit backed by the equity (HELOC) for these purposes, to finance a business venture, or the purchase or rehab of an investment property.
Remember the IRS has verified the interest deductibility of a HELOC when used to improve a primary residence.
Another opportunity presents itself through Home Equity Conversion Mortgages (HECM’s). Baby boomers, in a position to retire, can tap their built up equity through a reverse mortgage and eliminate their monthly principal and interest expense.
This is huge for those who have worked hard to maintain their home and now need a little extra cash and the reduction in monthly expense. So, they can retire comfortably and live out their retirement years in the home they worked so hard to maintain.
Whether it is through new cash-out refinances, HELOC’s, or HECM’s, the increasing home equity presents an opportunity for consumers and lenders. Both can benefit.
It’s a matter of knowing and understanding the options and being prepared to take advantage of them when the opportunity presents itself.
Are you prepared, like Villanova was, to take full advantage of the opportunities? Are you ready to make a drive to score increased business and outplay the competition? Success doesn’t come by accident.
Those who work hard and prepare are the ones who will succeed. The others will get eliminated from the business brackets. Be ready, get prepared, be a winner!
Congratulations to Villanova. Preparation, practice and hard work do pay off.
Editors Note: The City of Philadelphia is hosting a parade for the Villanova Men’s Basketball Team as this blog is being published.
