Residential Magazine

Gain Traction in Ultracompetitive Markets

A well-known initiative levels the playing field in areas flush with all-cash buyers

By Jeff Miller

There’s a reason that homeownership is deemed the American dream. It’s supposed to be a sign of freedom, opportunity and a feeling of achievement at reaching one of life’s ultimate milestones. It brings a sense of pride knowing that you’ve worked hard and acted on transformational moments along the way to land your ideal house.

Pursuing the American dream, however, has recently turned into the American nightmare for some people. Many first-time and working-class buyers find themselves outgunned and seemingly out of options due to an influx of all-cash offers and record sales prices.

The booming U.S. housing market has forced many mortgage originators to think outside the box. What used to work won’t necessarily work now. Creative, effective solutions are critical to stand out and win the day for clients. This is especially true in regions like the Pacific Northwest.

The housing-price surge across the Pacific Northwest rivals that of any other region, according to a recent report from the National Association of Realtors (NAR). Prices in Portland, Oregon, for example, climbed 17.5% year over year in first-quarter 2021 as available inventory remained near historic lows, with an influx of out-of-state buyers and continued low interest rates helping to fuel demand.

Similarly, the housing market in western Washington recorded higher price growth than the U.S. as a whole during the same 12-month period, NAR reported, with prices rising by 17.9% in the Seattle metro area. Overall, home affordability in both Seattle and Portland is far more costly compared to most other major U.S. metros, and first-time homebuyers typically play the role of a gazelle in a field full of lions and leopards.

Although current housing-market conditions present obstacles, there are a variety of paths to stable homeownership in this day and age. These include new and largely untapped loan programs that mortgage originators can use to help level the playing field for homebuyers in competitive markets like the Pacific Northwest.

Fighting chance

One of the programs that is changing the mortgage industry for the benefit of both borrowers and lenders is Day 1 Certainty. Initially launched in 2016, Day 1 Certainty is a Fannie Mae initiative that provides borrowers with freedom from representation and warranties on key aspects of the mortgage origination process.

The program presents a significant opportunity for lenders to enhance productivity and profitability while also pleasing borrowers with a faster lending process. Speed is the great equalizer that gives the gazelles a fighting chance against all-cash heavyweights.

Through Day 1 Certainty, verification is handled electronically to ensure expediency and accuracy. Fannie Mae’s integration of Day 1 Certainty embraces the modern digital age by providing greater efficiency and significantly reducing risk throughout the lending process. With this program, lenders can expect an easier documentation process, streamlined loan processing, underwriting validation of the borrowers’ income and assets, and faster and more confident closings. Additionally, lenders are provided with representation and warranty relief, reducing their exposure to repurchased loans and improving risk management.

To take full advantage of the benefits of the program, it’s imperative that lenders take the time to understand the program and its capabilities. They should train internal team members at all levels from origination to closing, develop relationships with data-validation providers to further streamline the process and integrate these systems into internal loan origination platforms.

Snowball effect

One of the best methods to achieve Day 1 integration at a companywide level is by starting a voluntary pilot program within select divisions. Lending professionals can experiment and tinker with the new tech tools at their disposal while thinking through how they can sharpen and fine-tune existing processes in order to take full advantage of the program.

Positive feedback and the sharing of success stories can create a snowball effect that quickly increases user comfort levels, allowing mortgage companies to achieve adoption at a higher level. Overall, there are three main takeaways to help lenders and originators level the playing field in ultracompetitive markets.

  • Make loans easier to approve. By using streamlined options like Day 1 Certainty, the lending process goes much more smoothly and has significantly reduced risks. Through various verification services, lenders are assured seamless, secure and timely validation of information to make loans easier and faster to get across the finish line. Additionally, because information about income and assets is already secured and confirmed, underwriting times move exponentially quicker.
  • Be faster to close. Across the mortgage industry, lenders have integrated many elements to reduce wait times and close loans faster, including electronic document submission and e-signature capabilities to ease the process for borrowers and themselves. By implementing this technology, lenders reduce the time spent wading through paper documents and can instead obtain permission from borrowers to have their information reviewed and confirmed electronically. It also eliminates the risk of duplicate documentation, allowing lenders to close more quickly and get clients into their dream home.
  • Lower the costs. Lenders in these ultracompetitive markets also can effectively leverage property appraisal waivers available through Fannie Mae and Freddie Mac on conforming loan products, which can help navigate the extreme backlog in the appraisal system. Saving six to eight weeks and a chunk of change on the overall cost of a loan is significant enough that it allows first-timer buyers to better compete.

All of these factors combined may help score some victories in a competitive market, or at least help clients find a more meaningful and fiscally responsible deal. Of course, it’s also imperative for lenders to utilize in-house programs that allow borrowers to be preapproved for their mortgage, providing peace of mind and a push toward the front of the line.

Going through this process at the beginning ensures avoidance of the common pitfalls and last-minute hiccups that often arise. This allows certified homebuyers to close up to two weeks sooner compared to those borrowers who are simply prequalified.

● ● ●

Day 1 Certainty isn’t the only loan program changing the mortgage industry, but its emphasis on digitization and expediency is a trend that’s setting the table for the future. Loan limits will certainly continue to increase in the years ahead. There will be an increase in technology to keep these processes moving efficiently and tackle the impending loan volume.

Throughout the past year, consumers have enjoyed record low interest rates and won’t want to move away from these mortgages. There will be a resurgence in cash-out refinancing to help improve people’s homes as remote work continues to be part of everyday life. The housing market is a hot topic right now and it’s only going to continue to evolve, so the mortgage industry needs to change along with it. ●


  • Jeff Miller

    Jeff Miller is vice president of Churchill Mortgage’s Pacific Northwest region, where he is leading the company’s regional expansion efforts. With more than 20 years of experience in the mortgage industry, Miller is a firm believer in achieving debt-free homeownership and is a champion of loan programs that help interested homeowners make the best choice, such as Churchill’s Certified Home Buyer Program, a key difference-maker that ensures buyers can place confident, expedient and trustworthy offers in competitive markets. 

You might also like...