HYPONATREMIA -- definition is death by drinking too much water....How ironic that after 40 days and nights in the mortgage desert we FINALLY get water but it’s from a FIRE HOSE! In Hyponatremia you basically drown your cells, your lungs fill up and your brain swells and you go into a coma and die. Now, it only happens when you drink too fast, usually marathoners who have sweated out the right balance of chemicals from their system and replaced it with just water. Your body can handle 8-12 8oz glasses of water a day, of which it gets some from daily food intake. It just can’t handle those 8-12 glasses chugged all at once, especially after a long period of dehydration…
I know I am brutal with the analogies, but as a sales guy it's the easiest way for me to learn. It stays with me. Especially during times when I am singularly focused and have a hard time seeing things another way. Refi booms -- especially after long periods of slow and difficult mortgage business -- are a time to get every loan you can. While I don't believe it is a God given right, I do believe it is more earned for those who have built up a well- defined, well-counseled list of borrowers who have been cultivated by constant contact of value. These borrowers have come to value that loan officer’s guidance and have set pre-determined rate/terms where it makes sense to do a transaction in the long term financial scheme.
That being said there are limitations that must be fully explained to all. Like a stock that you wish to buy or sell with a GTC order, just because that stock shows that it hit the target price doesn't mean that your order goes thru. There has to be enough capacity in the time provided for an order to go thru. You have to get in line and basically there is an imbalance of buyers and sellers, and depending of when you placed the trade there may be none available when they get to you. During the absolute wackiness of this past week it has to be driven home that "you will do the best you can--best efforts -- to get them that rate. There are no guarantees-until you receive the absolute confirmation that it is fully locked and confirmed with the true final investor. DO NOT tell someone they have it, until you truly do. If they are not willing to trust and be patient with you during those times, they are not a long term client who will refer you business and be your advocate to others.
You need to realize there is only limited space available for your best customers. This is what happens during refi spikes, not refi booms. Look at the rate charts, this period may look a lot like a 2001 or 1998 with saw tooth moves not the long many month slides. Don't blame your company or back shop for not being able to take 4x your normal volume for a short period. Your business has probably dropped significantly over the past year and you are lucky if your firm is still a float. You can't expect them to turn on a dime and take all that you are bringing in. Name me a business who can handle an unplanned 4x spike in business! AND it is perishable goods that we are dealing with! In a V shaped move these are ticking time bombs that must be diffused in time. You just can’t shrug your shoulders and say "Oops I tried sorry!" if you can’t perform in the end. These are massive liabilities that need to be satisfied; you must deliver on your obligation--legally and morally. So do not take it lightly.
Take your client list and map out the rates where it makes sense for them to refi. Then sort them by rate. Do you see the exponential steepness of the curve as you drop each .125? If you have 100 clients to refi, you probably have 15 at 5.5, 30 at 5.375, 50 at 5.25,70 at 5.125, 100 at 5.00; because you start feeding on the loans you closed 90 days ago at 5.5. Well do the math for the country and you can see that the capacity is not out there to handle the move we had Tuesday and Wednesday. Large lenders are silo built dinosaurs where secondary, operations and production are not in alignment. They can't make a quick decision to save their life! They will keep rates low, accepting locks even though they can’t close the volume. They will then try and find ways to kick out the locks that they will take a bath on, decline approvable deals or just take a hit 120 days later when they close the loan. If someone is lower and being flooded with loans; in these volatile days be very wary whether those deals will close.
SO if you have limited space do you give it away for low margin? Supply and demand? If it's your best clients, I believe a fair deal is what is deserved. Not working for nothing. Your costs are so much higher to produce these loans because of the double time paid to staff and the packaging mistakes made in high volume. Low margin in the end is the ultimate insult. IF you do a loan for someone outside your normal core group of referral sources then a higher margin is a must. These slots are precious, don't waste the opportunity to take of the people who take care of you in ALL markets or miss margin opportunity.
Just a note to all: Barry Habib's Mortgage Market Guide has been particularly good during these times. His Fed Rate Cut flyers were right on the money as was his assessments during the volatility. They helped keep perspective during these meltdowns.