I’m sure you’ve been mulling over Janet Yellen’s comments to Congress this week and how they may affect our industry. I have been as well. Like I’ve emphasized on this blog time and again: change will always happen, change is not necessarily bad and perspective is absolutely everything (when you consider the long-term average 30-year rate is 8.24 percent).
Yellen noted the Fed is likely to raise interest rates three times this year, citing steadier inflation figures and consistent employment growth. She also made the very valid point that the U.S. has a stronger banking system and has grown faster than most other countries since the 2008 recession. We have also added 16 million jobs since unemployment peaked in 2010. In essence, Yellen seems to think we’re on a relatively good path and there’s reason to be confident in the overall outlook. Not a bad sentiment to celebrate.
Naturally, our industry will always experience ebbs and flows as these rates rise, or as the promise of rising rates looms. It’s a simple fact of life as a mortgage banker. It’s a life we signed up for. But what if, rather than throwing up our hands and lamenting that the “good times” are over, we put that old pal Perspective to use and take some time to reevaluate?
I did just that the other day when I came across a National Real Estate Post vlog that featured MBS Highway CEO and founder Barry Habib. Habib and host Frank Garay discussed Yellen’s statement and the recent Fed talks. He believes it will be a good idea to engage in slight rate hike increments – and that these should happen sooner rather than later. Habib’s logic is that we may wind up farther behind the curve if we wait too long to keep pace with economic markers. He also expressed fear that if the Fed must make up some progress because they sat on their hands too long, it may very well spook the markets, causing broader-reaching economic consequences.
On the industry side, Habib also expressed concern that interest rates could be further impacted if the Fed stops reinvesting in mortgage bonds. Right now, they’re purchasing about $8 billion to $9 billion of these notes a week. If this ceases, rates could go up another 0.5 to 0.75 percent, Habib believes.
Lastly – and perhaps most importantly – Habib noted that regardless of what the Fed does, our job remains the same: get the deserving people of this country into a home they love. He reminded me of an important lesson that can often be forgotten when news about rates or other “threats” to this industry become public. That lesson is we’re selling opportunity.
Habib believes in “quantifying the difference” – showing potential borrowers what sets us apart and sharing in their excitement regarding the home, its amenities, its neighborhood, demographics and potential appreciation based on historic data. He believes that while realtors may sell a home’s features, a borrower is only able to buy a home because we ultimately sold them financial opportunity.
“That’s how they buy the home,” Habib told Garay during the vlog. “They look at the physical house and the attributes, but they buy with their pocket book. With their wallet. Mortgage bankers sell to that.”
And that is done by refining our skills, remaining disciplined, fostering our industry relationships, and continuing to get our paperwork filed and approved in a timely manner. When we do this, we remain abundantly successful at selling the financial opportunity for the American Dream.