Sales Boomerang: Surge in Credit Improvement Alerts Suggests Opportunity for Lenders to Revisit Turndowns

Sharp increases in cash-out, credit-improvement and new-listing alerts quarter-over-quarter point to opportunity for lenders in a contracting mortgage market, reported Sales Boomerang, Owings Mills, Md.

“New home listings and cash-out alerts both trended upward in the second quarter, making purchase and home-equity products smart areas of investment for lenders as they prioritize assignment of limited resources,” said Sales Boomerang Executive Vice President of Product Mike Spotten. “Another trend we are monitoring with interest is a massive upswing in credit-improvement alerts. Mortgage advisors are going to want to revisit prospects previously denied loans for credit-related reasons before they take their business to a competitor.”

The Sales Boomerang Mortgage Market Opportunities Report reviews data from residential mortgage lenders to monitor millions of customer and prospect records. The report calculates and compares the frequency with which those contact records triggered loan-opportunity, prescriptive-scenario and risk-and-retention alerts during the first and second quarters.

Rising interest rates have slowed the speed at which borrowers are paying off their mortgages, as shown by a precipitous drop in Risk & Retention Alerts, the report said. As a result, the value of mortgage servicing rights continues to grow. Lenders must carefully weigh the pros and cons and potential balance sheet impacts of retaining versus selling MSRs.

With New Listing Alerts rising for a second consecutive quarter and reporting new home listings are growing at a pace not seen since 2017, purchase origination opportunities continue to dominate the market, underscoring the importance of strong referral partner relationships, the report noted.

Cash-Out Alerts also increased significantly from Q1 to Q2 as tappable home equity continued to grow in many markets nationwide. “Lenders that do not currently offer home-equity products such as cash-out refis and HELOCs may be leaving money on the table,” the report said. Credit Improvement Alerts saw a significant quarter-over-quarter increase, echoing widely publicized reports that Americans’ overall financial well-being has improved due to pandemic-related fiscal measures including government stimulus payments, tax credits and student loan moratoriums, Sales Boomerang said.

“Because FICO scores are a lagging indicator, the impact of more recent COVID variants and consumer inflation have yet to be seen in credit scores,” the report said. “Regardless, now is a great time for lenders to revisit loan applicants they previously turned down due to a history of poor debt repayment.”