Economic jitters are stressing out LOs and their clients

“With rates increasing by approximately 130+ basis points since then, we anticipate this will have a significant impact on borrowers who didn’t lock in time. MLOs are now [having] tougher conversations with clients about the shift in affordability and rate expectations,” she said.

Borrower behavior now is quite reactive, Hoff said.

“With so much volatility in rates, we’re seeing a mix of urgency and hesitation. When rates dip-even slightly- we see a rush of borrowers trying to lock quickly, especially refinancers or those who have been on the fence. On the flip side, when rates jump, some buyers pause, hoping for better timing or more clarity on where the market is heading.”

LOs said the economic volatility has shaken borrower confidence. Several said clients are more reactive and quicker to ‘shop’ rates.

Borrowers strapped for cash

Phil Crescenzo Jr., Southeast division vice president at Nation One Mortgage Corp., said he’s witnessed more consumer anxiety around rate fluctuations and job insecurity.

“‘I’m seeing some nervousness about what’s to come in the future, even in regards to employment,” said Crescenzo, who regularly works with lower-income clients. “If a client is working overtime to make their mortgage payment, maybe those overtime shifts aren’t going to be available. These are things that don’t normally come up in conversation on the consumer level, but are now coming up, because when a client sees or hears a recession, they may think, ‘Well, maybe my company is going to be in trouble.’ Maybe their employer isn’t going to be doing great with this economic news.”

Crescenzo says that rates above 7% are a turn-off for buyers, even if they could still afford the payment. “I’ve noticed is that when the interest rates break above 7%, it just changes the psychology a little bit. So they just assume the worst. And so a lot of times, feedback and direct education and breaking down the client-specific scenario does get them a little bit more comfortable,” he said.

As borrowers try to make the numbers work, they’re seeking out offerings like 2/1 buydowns. But sellers are also willing to compromise with concessions.

“We’re seeing sellers are more open-minded to negotiate because of the rates,” he said. “The upside is that the homeowner who’s selling doesn’t want to lose the buyer.”

Still, Crescenzo spoke optimistically about the future.

“I worked through the crash of 2008; Today is nothing like that, by the way. It’s drastically different. But it was a crash, and it was turbulent times that we had to work through, economically. Buyers just assume that right now is like 2008 because that’s the last really bad time that their mind goes to.”

Unconventional borrower attitudes

Deephaven Mortgage‘s chief sales officer Tom Davis said that the company continues to “fight the good fight” while dealing with headwinds. However, he touted the “resilient” non-QM borrowers that the company serves.

“I think the biggest challenge right now is you’ve got some uncertainty with what’s going on currently, and then you have an affordability crisis, because you’ve seen higher rates, you’ve seen higher insurance, higher taxes, and so I think those are the big headwinds. In the non-QM space, or nonagency space, we’re remaining resilient,” Davis said.

Borrowers’ attitudes vary by region. Florida, for example, is keeping Deephaven busy. “Florida’s market, for example, has five out of the top 10 self-employed cities in the United States. I think certain areas are becoming more of a problem than others because of higher taxes or higher insurance costs. So that’s putting a pause in certain markets.”

Investors are also keeping originators busy and bullish, which culminated in Deephaven’s best month ever, Davis claims. The company has been “maniacally” focused on the second-lien space and providing debt consolidation and renovation loans.

“Look at the investor space: 25% of transactions last year were investor transactions. So the originators who are focusing on self-employed, who are focusing on investors, they’re working with people that are well-heeled and have multiple transactions that are happening on an annual basis. And so there’s this repeat business…we’re bullish, and we’re seeing a lot of traction.”

Davis agrees that sellers are more flexible these days.

“I think if you can afford to buy the home today, it’s really a buyer’s market. You’re seeing sellers reduce their prices and give concessions, allowing the buyer to purchase a home and have more leverage in today’s environment. And you haven’t seen that in many, many, many years,” he said.

Flavia Furlan Nunes contributed to this report.