What's been key to handling the mortgage market curveballs of 2024?

Written By Fergal McAlinden

wemlo exec on adapting to this year's market – and gearing up for a refinancing wave

The outlook has brightened for the US mortgage market in the second half of 2024 – but it’s still been a year with plenty of curveballs to keep mortgage professionals guessing and constantly adapting.

Speculation about a flurry of Federal Reserve interest rate cuts was rife at the beginning of the year, with a seemingly softening economy and regressing labor market suggesting early moves to bring rates lower could be coming.

But that didn’t transpire, with the Fed’s earliest cut of the year arriving only in mid-September with a 50-basis-point reduction.

Still, that allowed mortgage companies to pivot in anticipation of lower rates at some point in 2024 – and with the 30-year fixed mortgage average beginning to fall during the summer, those who had geared up for a jump in refinances were primed and ready.

At third-party mortgage loan processing provider wemlo, that shift was top of mind early in the year, according to Chelsea Balak, the company’s vice president of operations and sales.

She told Mortgage Professional America that after a purchase-heavy last couple of years, wemlo realized the potential for refinancing in 2024 and focused on bringing in that business. “We’ve just really been educating ourselves on different products: How do we stay on top of borrowers who maybe want to refi but don’t have the same urgency to get their loan closed like there is on purchase loans,” she said.

“We have to continually coach them through what documents to provide to us to quickly get it done, just because rates can change in a heartbeat and then all of a sudden what they signed up for is not what they’re getting anymore. So we just want to make sure that we’re following through on that. We’ve just been in prep mode all year long, waiting for the refinances to come through.”

Refinancing boom, downpayment assistance emerging as key trends

While rates have ticked upwards again in recent weeks after a months-long decline, Balak said that approach has prepared wemlo well for growing refi volume. At the beginning of 2024, its pipeline was about 95% on the purchase side with only a trickle of refinances – but that’s since rebalanced, she said, to a split of around 60-40 purchase to refi.

On the purchase side, meanwhile, affordability challenges remain a significant hurdle for many borrowers. Still, the growing prominence of downpayment assistance loans is helping narrow the gap to homeownership for many hopeful buyers, with a larger amount up front also whittling down the monthly payment shock.

At wemlo, “we’ve been getting really comfortable with those types of loans,” Balak said, “understanding the guidelines around them and how we continue to maneuver in that kind of atmosphere.”

What’s in store for 2025?

Of course, the bumpy market seen throughout this year means predicting the outlook for 2025 is no easy task. The general trend of falling rates in the second half of the year, though, is cause for cautious positivity, according to Balak.

It might not be a straightforward path to a busier market – “but I think we’ll see a strong spring season,” she said. That’s partly because the effect of the so-called “lock-in” effect, which is keeping Americans in their current homes at ultra-low rates instead of having to finance a costlier mortgage elsewhere, appears to be fading somewhat.

Plenty of homeowners may have locked in extremely low rates, “but you can only stay in a smaller home for so long before it gets to the point where you have to bite the bullet and make the move,” Balak explained. “So I think we’ll start to see that edge fall off for a lot of those homebuyers who are locked in at those lower rates but really do need to make the move.”

When it comes to advice for mortgage brokers and loan originators, meanwhile, Balak believes taking a careful look at measures to keep costs under control – especially in the current market – is essential.

A discussion around processing should be part of those deliberations, she argued. “Processing is something that you can outsource at low costs, with zero [negative] effect on how your business runs,” she said. “Things will continue running smoothly but without that extra cost that you have on your book.

“That’s something that I’ve been talking to a lot of brokers about – look at those numbers and your profit and loss, and what you can cut out while continuing the service without having to spend the extra dollars.”

Read the story on Mortgage Professional America here.