AFRWHOLESALE.COM

eBook

Your Guide to the Current Marketplace.

MORTGAGE MARKET TRENDS

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CONTENTS

I. The Client Experience . . . . . . . . . . . . . . . . . . . . . . . 4

II. Products to Leverage . . . . . . . . . . . . . . . . . . . . . . . . 6

III. Market Opportunities . . . . . . . . . . . . . . . . . . . . . . 10

IV. Promoting Yourself and Your Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

V. Trends Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

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Today the mortgage industry is fast paced, competitive, and constantly changing. Long gone are the times when many home buyers fit the same mold. For example, young couples who would save for a few years, and then sit down with a representative at the local bank branch to apply for a 30-year fixed rate mortgage. The current market is filled with incredible diversity, and a huge variety of mortgage products to meet the needs of today’s home buyers and homeowners.There is no one-size-fits-all mortgage program, as today’s home financing products vary as much as buyers. Some borrowers may not qualify because they don’t make enough money, another because they make too much (as is possible in the case of a USDA mortgage.)

INTRODUCTION

There is no one size fits all mortgage

program, as today’s home

financing products vary as much as buyers.

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I. THE CLIENT EXPERIENCEMortgage shoppers in the current marketplace tend to be busy, technology savvy, and looking for value. Here are some of the things they’ve come to expect from the mortgage experience, and are looking for in a mortgage company:

1. COMMUNICATION From the initial quote through closing, whether buying a home or

refinancing, clients want to know what is happening and when, and what impact it has on the overall process.

Some borrowers will be more comfortable communicating via email, others over the phone, and others will appreciate brief text updates. In addition to keeping them happy, being flexible and reaching out in the manner that works best for your client will allow them to be more responsive to you as well when additional information or documentation is needed, or decisions need to be made.

2. USE OF TECHNOLOGY While there will always be borrowers who prefer in person meetings, paper documentation, and ink signatures, the trend is decidedly towards making use of available technology to streamline the process, making it easier and more efficient. Many of today’s home buyers shop on their smartphones, bank

online, and are comfortable with securely submitting and signing documents electronically. In fact, a 20151 survey revealed that mortgage applicants were more satisfied with the process overall when they completed electronic applications (on a website, mobile app, or via text message) and could submit documents and monitor the progress of their application digitally.

While consumers appreciate the ease and time savings associated with this new technology they are still wary of fraud and information theft and want to be sure their personal information is protected. Include a simple to understand explanation of the security precautions your company takes on your website and in your communication with customers. 1 http://www.jdpower.com/resource/us-prima-

ry-mortgage-origination-satisfaction-study

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3. RESPECT AND UNDERSTANDING While taking advantage of the benefits afforded by technology we must be certain not to lose the human connection that has always been a crucial part of the mortgage industry. Our clients are making important decisions about their homes and their finances and don’t want to feel like a number. Be sure that you let borrowers know who to reach out to with questions and how to get in touch with them. Work to convey the feeling that your organization understands the importance of each transaction to your clients, and that it’s important to you as well.

4. OPTIONS There is no one-size-fits-all mortgage program and today’s borrowers want to know that you have a solution tailored to their scenario. Whether they’re looking for a low down payment loan for a first home, financing to purchase a fixer-upper, or a jumbo loan for a second home it’s important to have a wide selection of programs so you have the loan that will meet their needs. Working with a lender like AFR gives you the ability to provide your customer with unique choices.

5. DELIVERY ON PROMISES Frequent requests for additional documentation, closing delays, and changes during the process all cause frustration on the part of the borrower. Be sure to deliver a smooth process from the first contact all the way through closing. Is market volatility, employee turnover, and regulation changes making this tougher and tougher? We can help. Take a look at our On-Demand Processing program where we process, underwrite, and close your loans for you. You are able to count on consistent service on every loan and focus on keeping your pipeline full.

Take a look at our On-Demand Processing

program where we process, underwrite,

and close your loans for you.

II. PRODUCTS TO LEVERAGEIt’s tough to imagine a time when there wouldn’t be a market for the conventional 30-year fixed loan, but as we’ve discussed previously, it’s not a one-size-fits-all solution. By offering niche products that meet specific needs common among today’s home buyers and property owners you can create opportunity and grow your business. A few products to explore:

A. RENOVATION LOANS • FHA Standard 203(k): Used to finance both the purchase of

and work done on a property, it is an excellent option for larger home renovations.

• Streamlined 203(k) Limited Repair Program: Used to finance minor repairs that are not structural in nature. There is no minimum repair cost requirement as there is with some other programs, but the cost cannot exceed $35,000.

• FHA 203(b) with Repair Escrow: Specifically to be used for buying homes directly from HUD that need a small amount of cosmetic repairs or improvements. Repair costs are capped at $5000.

• FHA 203(h) Mortgage Insurance for Disaster Victims: Allows for up to 100% financing to help victims of disasters purchase a new home or rebuild after their property was substantially damaged.

• Fannie Mae HomeStyle® Renovation Mortgage: Includes luxury items such as pools and spas among the eligible improvements. Available for one unit second homes and investment properties in addition to 1 – 2 unit primary residences.

Many would-be home buyers are struggling to find homes for sale that have all of the features they are looking for, and are frustrated by lack of inventory in the current market. Renovation financing can lead to creative solutions to this problem, allowing your clients to either make improvements to their current home, or to find a property listed for sale that doesn’t quite meet their needs and turn it into their dream home.2 http://www.jchs.harvard.edu/growth-remodeling-spending-projected-peak-2017

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Home improvement spending has been trending upward and is expected to hit a new high

in 2017.2

B. ONE TIME CLOSE CONSTRUCTION LOANSAnother way to work around the low inventory issue? Build a new home. The one-time close construction-to-permanent loan available through both FHA and VA can make building a much more attractive proposition, particularly in rising rate environment.

Instead of the two phases typical of most construction programs where a first closing takes place at the start of building to finance the land and the build, followed by a second closing when the home is ready to be occupied to put the permanent financing in place, there is just one closing. This one closing arranges financing for the construction, lot purchase if applicable, and permanent financing all at once with one first mortgage loan.

This means that buyers can lock in an interest rate at the start of the process, and don’t need to worry about rates climbing while their home is being built. It also eliminates the need to requalify at the end of the construction process, and cuts costs by removing the redundancy of a second closing and the many fees that come along with it.

This one closing arranges financing for the

construction, lot purchase if applicable, and

permanent financing all at

once with one first mortgage loan.

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C. LOW DOWN PAYMENT MORTGAGE OPTIONSIncreased consumer confidence in housing3 has more consumers hunting for new homes, but that doesn’t mean they want to deplete their economic resources through a real estate purchase. Many buyers want to minimize their up front, out-of-pocket expenses and find low money down financing options. A few products to have at your disposal include:

• FHA Loans: Down payment as low as 3.5% and flexible underwriting standards. Clients purchasing HUD homes as their primary residence may qualify for the FHA’s $100 down program, further limiting their up-front costs.

• VA Mortgage: Up to 100% financing for eligible veterans, military personnel, and surviving spouses.

• USDA Rural Housing Loans: Zero down payment mortgage option for rural properties for buyers with lower and moderate income.

• Freddie Mac Home Possible® and Home Possible Advantage®: Qualified low and moderate- income borrowers can buy a home for as little as 3% down.

• Fannie Mae HomeReady™: Designed for low-to-moderate income borrowers buying in designated low-income, minority, and disaster-impacted communities. For one unit owner occupied properties there is no minimum borrower contribution.

3 http://www.fanniemae.com/portal/media/corporate-news/2017/february-home-purchase-sen-timent-index-6527.html

INVESTMENT PROPERTY LOANS Demand for rentals and rising rent4 have spurred interest in investment property purchases. An added benefit of having excellent rental property financing options is that successful investors are likely to come back to you again and again as they build their portfolios.

D. CONDO LOANS Condominiums are an attractive option for many types of home buyers. Those downsizing or retiring represent many condo buyers, but so do second home buyers, as well as first home buyers. Many millennial buyers who want to buy a home but are not ready to leave the city, live in a high cost area5, or are not interested in a lot of space or home maintenance, a condo could be a perfect fit.Not all mortgage professionals want to take on condo financing due to the extra layers of complexity. This lack of interest creates opportunity for those with excellent product options, like AFR.

4 http://www.cnbc.com/2016/06/16/rents-now-top-list-of-fastest-rising-prices.html5 http://www.scpr.org/programs/take-two/2016/05/03/48282/millennials-and-buying-that-first-home-how-it-s-po/

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Many buyers want to minimize

their up front, out-of-pocket expenses and

find low money down financing

options.

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III. MARKET OPPORTUNITIESA. MILLENNIALS Though they are often purchasing a first home later than previous generations, homeownership remains important6 to millennials. With rental prices exceeding average mortgage payments for comparable properties in many parts of the country, buying real estate is looking more and more attractive to this group.Low money down mortgage options are often a good fit for these buyers as student loans and slow career starts mean many young people haven’t been able to save a large amount for a down payment. The security of a fixed rate program also tends to be important to those new to homeownership.

B. RETIREES Consumers who are approaching or have reached their retirement years, may present a unique opportunity for the mortgage industry. According to a survey from Freddie Mac7 40 percent of this generation say they would like to move at least one more time. Of those who anticipate a move, 13 percent say they will likely move within the next four years.Though some of these buyers plan to downsize, many will be seeking a home in the same price range as their current property.

Factors influencing where to move to include: • cost of living • desirable amenities for retirement • reduced maintenance • proximity to family • warmer climateThis group is likely to have the funds available for a down payment and may be looking to reduce interest rate costs. Shorter term loans such as 15 year or 10 year fixed rate mortgage products could help them reach this goal.

6 https://www.abodo.com/blog/living-millennial-dream/ 7 http://www.freddiemac.com/finance/report/20160608_55ers_significant_impact_housing_market.html

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C. MOVE UP BUYERS As consumers feel more confident in the housing market and their own economic security8 many who held off moving to a larger and/or more expensive home are back in the market. Perhaps they were underwater on a previous home and property values have rebounded or they were wary of market volatility in recent years.Because they have often delayed this purchase for some time they are less inclined to compromise on their wish list when buying these next homes. When talking to these buyers, discuss the opportunities that can be created with renovation loans and construction-to- permanent loans, particularly in markets with especially low inventory among middle to high priced properties.

D. MULTI-GENERATIONAL HOMES A growing trend among home buyers in the U.S. is choosing to purchase residential property that accommodates a multi- generational household. A mixture of economic and social factors is motivating this activity. According to a study from the National Association of Realtors®9, buyers of multi-generational housing did so for the following reasons:Health/caretaking of aging parents - 22%

Cost savings - 14%

Children/relative over 18 moving back into house - 12%

To spend more time with aging parents - 8%

Children/relatives over 18 never left home - 8%

This segment of buyers may be interested in two or three unit homes. This would allow them to have the benefits of living close to family and sharing household expenses while retaining personal space for each segment of the extended family.

8 http://www.businessinsider.com/conference-board-consumer-confidence-february-2017-2017-2 9 https://www.scribd.com/document/292958832/Recent-Home-Buyer-Profiles#fullscreen

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IV. PROMOTING YOURSELF AND YOUR PRODUCTSTrends related to consumer behavior influence how to most effectively share your message and grow your business.

A. SOCIAL MEDIA On average people spend almost two hours a day on social media10. Reach your potential clients on Facebook, Twitter, Instagram, LinkedIn, Pinterest, YouTube or other platforms. Advertising here is simple, can fit almost any budget, and can be highly effective.

A few things to consider before launching a social media campaign:

• Think about who your ideal client is and target your ad delivery to reach them. Most of these platforms allow you to get very specific with your targeting to increase the efficiency of your campaigns.

• Focus on what sets you apart. It’s not enough to say you offer home financing. Why should someone work with you? Keep the message simple and direct.

• Grab attention. You’ve only got a fraction of a second to stop your next borrower mid-scroll…use images and headlines that will encourage them to take a second look.

• Stay in compliance. Ask your compliance department about any regulations or company policies related to social media posting or advertising. Regulators look at these like any other form of advertising and may request copies of anything posted to review during audits.

10 http://www.socialmediatoday.com/marketing/how-much-time-do-people-spend-social-media-infographic

Ask your compliance

department about any regulations or company policies related to social media posting or

advertising.

B. EMAIL MARKETING Stay in front of previous customers with regular email marketing. Even if they aren’t in the market for a new home or refinance they may pass your information on to someone who is.

Think through these tips for effective marketing emails:

• Keep your message simple Most people won’t read a long email filled with complicated details. If you’re promoting a new program share the top one or two selling points and encourage clients to call you to learn more. Sticking with something short and sweet also allows you to send the email on its way without taking too much time away from other important activities.

• Follow CAN-SPAM regulations These require that you include your physical address, provide an opt-out option, and honor opt-out requests in a timely manner, among other items. Learn more: https://www.ftc.gov/tips-advice/business-center/guidance/can-spam-act-compli-ance-guide-business

• Get in touch regularly You won’t always have big news to reveal, but there are lots of good reasons to reach out to previous customers. A few of these include market updates, rising or falling interest rates, a new program offering, real estate industry news, a birthday or anniversary, or just to say hello.

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C. MAKE THE CALL OR STOP BY Once again even the greatest technology can only take us so far. Human connection will always be a critical component of the mortgage industry. Sometimes it’s the same things we would have done a few decades ago that make the difference.

Drop by your favorite real estate agents’ offices with the best donuts in town. Remind them of your quick pre-approval turn times and excellent low money down programs.

Regularly mine your customer database for homeowners who could benefit from refinancing in the current rate environment. Have you talked to anyone in the past couple of years who didn’t have the equity position for a refi to work? Rising property values might have made the difference.

From renovation loans to construction-to-perm to low money down, AFR Wholesale is here to help you provide unique solutions to borrowers, streamline the process, and grow your business in a challenging but exciting market.

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V. TRENDS SUMMARYOverall, the consumer is in search of unique solutions and programs in lieu of traditional mortgage options. It is more important than ever to differentiate yourself from your competitors. A transaction-based relationship is no longer enough for the general consumer and value-based selling becomes key. Provide them with education, convenience, options, technology, and unique financing options to tailor the transaction to their specific needs.

AFR can help! With free non-branded marketing materials for you to leverage, a borrower portal with your logo to streamline communication and a robust portfolio with extensive niche product experience, we can help you find untapped opportunities for revenue. Find this and more with AFR by emailing Sales@AFRWholesale.com.

AFR Wholesale is a division of American Financial Resources, Inc (AFR). AFR is a nationwide wholesale and correspondent lender. Guidelines subject to change without prior notice. This information is provided to assist business professionals only and is not an advertisement extended to the consumer as defined by Section 226.2 Regulation Z. - Equal Housing Lender. Corporate Headquarters: 9 Sylvan Way, Parsippany, NJ 07054 www.afrwholesale.com NMLS ID #2826.