Mortgage Refis And A Wild Rate Environment

Mortgage refinance requests are coming in at record rates. This type of volume was already causing significant backlogs for some. The complexity just increased now that many businesses are practicing social distancing and the Fed took more emergency steps on Sunday, March 15.

The questions in this blog only scratch the surface of what needs to be considered and thought through with respect to mortgage refis.

• What is our capacity to deliver an excellent experience through the whole mortgage process for loans we start tomorrow, factoring in loans currently in process, social distancing and working remotely?
• If we anticipate more total demand than we can satisfy well, what options do we have?
• How should we define or redefine our service-level agreements in this environment?
• How can we ramp up an expedited process for members who meet certain criteria? If we decide to ramp up, what specific steps do we need to take to do this and how long will it take to get these steps done? How comfortable are we with identified risks?
• Should we prioritize existing members versus potential new members and subsets within, and if so, how should we prioritize them? For how long?
• If we prioritize members, how can we message to potential new members and limit negative impact to our brand?
• If we decide to not accept potential member mortgage applications for a period of time, who will control the messaging and what specific messaging do we want from all of our communication channels – employees, online/mobile, board, press, etc.
• How might call center support, including chat, need to change to help our members in this environment?
• What changes would we need to make to our phone system and protocols as volumes increase and we have more remote workers?
• What detailed actions do we need to take to ensure we are not unintentionally having significant wait times or losing calls?
• Should we expand our call center hours? If so, how? What triggers do we need to have in place if our first line of defense is our third party for overflow and after-hours calls?
• How can we monitor abandonment of online applications? How important is it for us to monitor? Does it matter if it’s existing members versus potential new members dropping off?
• Have we been piloting any automated responses that we are willing to expand to help with member service and free up staff for other things?
• Should we adjust our credit risk tolerance? If so why? How long will it take to implement changes throughout the organization?
• What changes do we need to make to ensure we are not taking on too much interest rate risk?
• Have we tested how much of an increase in mortgages we can hold in portfolio, at these low rates, and still be comfortable with the interest rate risk? Are we sure the concentration limits we have in place would still make sense with significantly lower mortgage rates?
• How might our process for deciding which loans to hold in portfolio versus sell need to change? For example, choosing those that may prepay faster/slower depending on our objective. Be mindful that mortgages going on at extremely low rates could impact earnings for many years. It is imperative that decision-makers are simulating and understanding long-term risks before making significant commitments.
• What changes in our investment strategy should we consider?
• Should we change our financial triggers, measures of success, and asset/liability management limits in light of 10-year rates flirting with sustained record lows?

As decision-makers you are facing a series of decisions, some unprecedented, depending on how long this surprising combination of events continues. The decisions you make and how you implement them can have lasting impact, positive or negative, on your brand with your employees, members, and communities.

As we have said in previous blogs, we find it is better to test-drive these critical decisions before you actually have to make them. As you are making decisions, where feasible, make them in light of your strategy and desired business model. For many, this can be an opportunity to fast-forward some necessary changes.

c. myers corporation has partnered with credit unions since 1991. The company’s philosophy is based on helping clients ask the right, and often tough, questions in order to create a solid foundation that links strategy and desired financial performance. c. myers has the experience of working with over 550 credit unions, including 50 percent of those over $1 billion in assets and about 25 percent over $100 million. They help credit unions think to differentiate and drive better decisions through real-time ALM decision information, CECL consulting, financial forecasting and consulting, liquidity services, strategic planning, strategic leadership development, process improvement, and project management.