HousingWire recently spoke with Jon Irvine, Chief Production Officer at Change Lending, about how brokers can gain a new competitive advantage in the current tight market.
HousingWire: The current inventory shortage doesn’t seem like it will let up anytime soon. What challenges does this present to brokers?
Jon Irvine: First, refinance volume has already dropped significantly from 2021 to Q1 2022. MBA estimates refinances will drop over 60%, but in my opinion, given the current trajectory, it could drop as much as 80%.
As a result, brokers will be forced to look to the purchase market to fill their volume needs. The combination of the slowing refinance market and the current inventory shortage has made fulfilling volume needs even more challenging. Since there are fewer houses on the market, naturally, there will be fewer purchase transactions as well. With that in mind, everybody is going to be working harder for their piece of a much smaller pie. Overall, it is stressful and hard on business.
HW: What are some ways brokers can gain a new competitive advantage, despite the challenges you mentioned above?
JI: The first thing brokers must focus on is their service and ability to close loans on time. Purchase-money transactions are particularly sensitive because brokers are often working with a referral partner in real estate. The ability to close loans as of the contract date is important for the customer and it serves to strengthen relationships with referral partners too. To stay ahead, brokers must find a lending partner that understands just how beneficial this is.
Another thing that can give brokers a competitive edge is the ability to align themselves with a partner that has a full suite of products that can serve a diverse set of borrowers. Not all borrowers will be able to secure a traditional mortgage. Having the ability to help various types of borrowers can really take a broker’s business to the next level.
HW: How does Change Wholesale specifically aim to provide brokers with an advantage?
JI: We have a saying at here Change Wholesale… “Close More, Close Faster.” How do we help brokers close more loans? By providing brokers with the broadest product base in the industry. Not only is Change Wholesale able to fulfill agency needs with traditional loan products supported by Fannie, Freddie and Ginnie, but we also have a suite of non-QM products too.
Additionally, as a Consumer Development Financial Institution (CDFI), we have unique products, like our Community Mortgage and EZ Prime program, that give brokers access to flexible lending options others cannot. This gives brokers a unique ability to fulfill the needs of more borrowers. Our proprietary Community Mortgage program is a unique opportunity for brokers to expand their product base. Community Mortgage loans allow amounts up to $3.5M, CLTVs up to 85%, and can be used for primary residences as well as second homes. Borrowers can even qualify for a Community Mortgage without employment or income documentation. It is a very unique product in the marketplace that gives brokers a huge competitive advantage, and that is just one of many ways a broker can successfully partner with Change Wholesale. Brokers will not have this same opportunity with other organizations.
HW: Given concerns about subprime loans and defaults, how is Change Wholesale mitigating the risks of loans like the Community Mortgage?
JI: To clarify, Change Wholesale is not a subprime lender. It feels like the non-QM or nonqualified mortgage moniker has become stigmatized by old subprime labels from the 1990s and early 2000s.
In reality, our Community Mortgage product is tailored for prime, eligible customers that have been unfairly cut out of the mortgage market. We keep a close watch on our default rates. Our average FICO scores are well into the 700s and we have great loan characteristics. Over the last two and a half years, The Community Mortgage has proven that non-QM loans can perform well and be great quality.