(Photo courtesy of Willie & Kim Photography)
As mortgage rates edge closer to the 6% mark, optimism has spread across the industry. Lenders are beginning to gear up for what is expected to be a “mini refi boom.”
But this wave will differ significantly from previous ones. Mortgage industry leaders caution that it won’t provide a life-saving boost for originators, but it does present strategic opportunities.
“It’s going to be a mini refi boom. It’s not going to save producers’ lives,” said Candice McNaught, senior vice president of national sales at Dallas-based Supreme Lending, during HousingWire’s IMB Summit in Dallas on Tuesday.
At Supreme Lending — which produced approximately $3.7 billion in origination volume over the past 12 months, according to mortgage tech platform Modex — executives are focused on improving their sales teams’ skills. Many loan officers have shifted their focus away from refinances in recent years, so a refresher is needed.
“We have taught loan officers how to redo loan refinances. There are so many who forgot how to structure a streamline, and we are letting them know it’s OK. We’re going to get them back to the basics,” McNaught said.
Yet McNaught stresses that companies shouldn’t limit their focus to refinance and purchase loans. Exploring opportunities with other products will strengthen company loyalty among sales leaders and provide long-term value beyond this refi wave.
The Mortgage Bankers Association (MBA) estimates that refinance production is projected to reach $591 billion in 2025, nearly triple the volume of 2023. While this uptick is encouraging, it pales in comparison to the $2.6 trillion in refinances seen in 2021.
“It’s never going to be like 2021 unless there’s another pandemic or something else,” said Kevin Peranio, chief lending officer at Paramount Residential Mortgage Group (PMRG). “But about $3 trillion worth of loans are in the money for refinance as rates keep coming down — that’s all the purchase money that has been done for the last couple of years amid higher rates. So, there’s a meaningful refinance business.“
Lower rates do lead to improved home affordability. MBA data shows that, in 2025, purchase loan production is expected to increase 30.8% to $2.38 trillion.
Peranio’s message to loan officers? “Don’t give up on the real estate agents who need you now more than ever.”
The retention battle
A potential challenge in this upcoming refi wave will come from servicers positioning themselves aggressively. Over the past few years, struggling lenders have sold mortgage servicing rights (MSRs) to shore up their cash positions during periods of higher interest rates and shrinking loan production.
With rates dropping, servicers are poised to use their growing MSR portfolios to offer refinances directly to borrowers, creating direct competition for other lenders.
“The biggest threat is thinking that the refi business is going to be easy this time around,” Peranio said. “The servicers’ game is really strong. “The competition between servicer and originator is going to be a little ugly this time around.”
Connecticut-based Planet Financial Group, led by CEO and president Michael Dubeck, has built out its servicing portfolio over the past few years. Inside Mortgage Finance shows the value of its owned servicing book was $96 billion in the second quarter of 2024, making it the 22nd-largest in the country.
The company has also improved its borrower retention capabilities. According to Dubeck, it has invested in data, marketing and sales skills to take advantage of this portfolio. Data from Fitch Ratings shows that Planet has a retention rate of 28% compared to the industry average of 8%.
“We had our best lock-in day in the history of the company last week. But it doesn’t come easy,” Dubeck said.
He went on to say that the company usually acquires smaller MSR bulk deals of “half a billion, a billion and a half,” very often from single-channel originators. But occasionally, it bids on larger bulks. He sees consolidation in the MSR market as it becomes more efficient. And he also pointed out capital requirements from Ginnie Mae that can motivate some MSR sales.
“The bigger names are probably going to become more competitive, and it’s going to be harder for intermediate smaller companies to keep up,” Dubeck said.
Low-balance loans
Regulators are also expected to play a critical role in shaping the next refi wave. They believe many borrowers with low-balance loans were overlooked during the 2020-2021 refinancing frenzy due to high origination costs.
At the Consumer Financial Protection Bureau (CFPB), Director Rohit Chopra has indicated plans to incentivize lenders to cater to these underserved borrowers.
“There are thoughts and ideas about creating greater incentives for IMBs to participate in those lower-end loan cost structures,” said Taylor Stork, chief operating officer of Developer’s Mortgage Co. and president of the Community Home Lenders of America.
“When you look at what FHFA is driving through the enterprises, through the scorecard system, to create additional incentives for low-ball loan amounts, those can create some profit opportunities, but it’s a distinct challenge. But it’s also simultaneously a distinct opportunity because there are a good number of people who didn’t get the 3% refi and will be potentially able to refinance it at 5% and 6%.”
