It would probably be an overstatement to say refi-hungry mortgage borrowers are stampeding Macon Bank in Franklin, NC.
But after the Federal Reserve lowered interest rates late last year to levels that begged for someone...anyone...to lend or borrow, homeowners seeking lower monthly mortgage payments have suddenly rediscovered their mortgage lenders' bookmarked Web sites.
"Right after the rates came down, we got as many people in one day as we had gotten in the previous month looking to refinance. And we're still getting them," says Kristy Daigle, mortgage processing supervisor for Macon Bank, which has about $1 billion in assets and a pipeline of about $25 million.
Macon isn't alone. Short-staffed banks are leaning more heavily on automated origination platforms to handle an unexpected windfall of refi's.
The heavy use of these platforms is partly blamed for the downturn. But today's more sober underwriting environment and skittish capital markets that have rediscovered risk should prevent a rash of bad Web-enabled loans.
Richard Beidl, an independent mortgage consultant in San Diego, says tougher underwriting guidelines from Freddie Mac and Fannie Mae will make it harder for borrowers with questionable credit profiles to get speedy approvals largely based on a recommendation from an automated underwriting platform.
Lenders not on the sidelines have little choice but to count on the automated platforms that are now their only hope of handling the new volume.
"The movement in rates has been so dramatic it may have caught people by surprise. It's very possible that lenders could end up with a volume that they can't handle," says Mike Sklarz, president of New City Technology, a Honolulu-based real estate data and analytics firm. "Firms have been hacking away at staff like crazy to get expenses in line with revenues, so they very likely are overshooting."
Macon uses Mortgagebot, an online origination product, and Ratewatch to give customers and realtors an early heads-up on market moves. The lender says about 90 percent of its current mortgage volume is refinancing applications.
"Without the ability to do online applications, there's no way we could have kept up with all of the people who have been coming in," says Daigle.
The use of automated origination will help lenders keep up with higher volume resulting from lower rates, and it will also allow lenders to keep staffing costs under control. But lenders say the technology can only be effective if the volume-at-all-costs attitude of the past remains in the past.
"Anytime you stress an origination system with a large volume of business, you risk people cutting corners," says Gregg Formigoni, vp of mortgage lending for the $250 million-asset Illini Bank in Springfield, IL.
But Formigoni also says his bank - whose branch managers serve as loan officers - wouldn't have been able to handle the recent uptick in volume without automated systems. "I logged into our system on a recent Sunday night, and saw that we had 13 applications submitted [that day]." Illini's online application also provides disclosures electronically, pulls credit files and submits that information to Fannie Mae's Desktop Underwriter system for a preliminary review. "So on Monday morning, we're doing fact checking and verifying the information on the application."