Could Credit Crunch Accelerate Borrower ARM Refinancing?

What does the mortgage credit crunch have to do with mortgage borrower behavior? A lot! Well, maybe not as much the actual credit crunch as the hype and exuberance that it has generated.

Most borrowers have no idea what a credit crunch is or why mortgage companies are imploding, but they do know there is panic and mayhem in the mortgage market.

Consumer reaction: Mortgage? I have a mortgage. I heard rates are going up. People are losing their homes in record numbers. The stock market is going crazy because of mortgages. Oh no! I have and adjustable rate and it is going to go up. My payment will go up. I won’t be able to pay it. I will lose my home! PANIC!

Now marry that reaction with Bernanke’s statement and ARM reset data from Paul Knag’s post about another topic–the Folly of Mortgage Lead Generation–and you have an opportunity building for smart mortgage businesses:

“Bernanke told Congress last month that the housing swoon ‘will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth should diminish over time.'”

But it will take longer than you might think for that negative influence to decrease. Let’s take a look at the following table. This shows the amount of adjustable rate mortgages that reset each month for the first half of this year and will reset for the next 18 months. Note that these reset numbers are a driving factor in the increasing rise in foreclosures. Pay attention to the numbers I highlight in red for January through June of 2008. The largest portion of mortgage resets is not until next year.

Are you talking to these consumers? Are you the calming voice? Are you genuinely trying to help them?

You want a survival, maybe even a growth strategy? Do this today.

  • Search your loan files pull out all of these short-term ARMs
  • Send a note, make it personal if possible, and give a brief (Real people English only) explanation of what is going on
  • Use calm, not alarm
  • Tell them you will review their financial situation and options for free
  • Tell them they may need to do nothing, but they should check
  • Follow-up with a call
  • Tune all of you marketing and Web to explaining the market in calm consumer language
  • Offer advice and consultation, not loans

Help your clients and it will grow your business!

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2 responses to “Could Credit Crunch Accelerate Borrower ARM Refinancing?

  1. Pingback: Credit - How to Get Credit |

  2. What a great idea, be part of the solution instead of just throwing your hands up.

    I know that the credit crunch and ARM adjustments will create more listings in the lower and mid-range spectrum of our market. There will even be people downsizing from the 2 Million price range.

    The baseline of buying and selling will remain unaffected. This means that there is always a minimum number of buyers and sellers who have to move, just that fewer buyers are qualified.

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