Overnight, the residential mortgage industry is in a real crisis, the first days of what may be an extended and painful credit crunch. American Home Mortgage, my employer of 10 years, collapsed with incredible speed last week, when the entire secondary market for our products evaporated. BlownMortgage has a good summary of all that happened on Friday.
An entertaining highlight from the day was Jim Cramer freaking out on air, announcing "armageddon" and railing against Fed Chair Ben Bernanke and " We won't rescue the markets" Fed President Bill Poole, pleading with them to drop the Fed funds rate at the FOMC meeting next week.
The gist of it:
- Rates are shooting up: Despite the fact that Treasury bonds are down and may continue to drop, residential mortgage rates will not. Generally speaking, the spread between mortgage rates and Treasury bonds has increased markedly because mortgages are now seen as riskier and have been repriced to reflect that increased risk.
- Products are being eliminated, guidelines are being modified daily by lenders, with wholesale and correspondent channels sometimes getting whacked harder than retail.
- The non-bank mortgage lender who relies on warehouse lines of credit to fund its loans, and a secondary market to purchase them, may no longer be a stable business model, suggests investment bank Keefe, Bruyette & Woods.
Considering these events, I took a stab at identifying 10 ways they will immediately change mortgage lead generation:
1. Increased filtering restrictions from lenders
2. Increased % of unsold or undersold leads
3. Reduced overall refinance lead buying
4. Increased demand for purchase leads
5. Increased demand from consumers for unrealistic product and price(time to rethink the call to action and advertising copy).
6. Publisher/advertiser relationships may need revision.
7. Significantly decreased conversion rates across the board for lenders as borrowers expectations or requirements are not met.
8. Increased importance of income and debt ratio information
9. Need for LTV validation to be developed and improved
10. Vendors start requiring Countrywide, QuickenLoans and others to prepay ;-)
The world has changed, how have you?