Leader Bank - Residential Lending Insights

This is the first is a series of posts from Leader Bank for our correspondent community partners. To sign up to receive this directly to your inbox please email [email protected].

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The Appraisal

With the third quarter behind us and fall well underway, Leader is focused on the year’s remaining opportunities. September brought a temporary bump in refinance activity, but now we are back to building our market share. Leader is the #1 bank purchase mortgage lender in Massachusetts with 5.5% of the volume in September. And we have increased our position in New England and around the US. How have we done it?

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Much of our success over the past two years is based on the trust we’ve built as a reliable, purchase-focused lender. This trust has been invaluable in navigating a tight market, where low inventory and high competition have led some players to pull back.

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We have also tailored a differentiated product suite, designed to help clients navigate today’s market challenges. As a peer lender, you’re likely encountering some of the same issues, so I wanted to share what’s worked for us in hopes it can benefit you too.

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Two programs that have been particularly effective:

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1. Move and Improve Line: This is a 5% equity line offered alongside our 80% first mortgage loans, enabling clients to access equity after closing for expenses like moving or small renovations. After the NAR (National Association of Realtors) settlement we shared with real estate agents how buyers could also use the Move and Improve line to pay for agent commissions.

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2. Purchase Pass Program: With tight inventory driving demand for competitive offers, we’ve developed Purchase Pass, a fully underwritten commitment letter contingent on the client finding a home. To enhance this program’s appeal, we’ve added a 10-day closing guarantee, appraisal protection, and a high-yield savings account for the down payment, allowing clients to earn interest as they search. This program has not only helped clients compete with cash offers but also shown our responsiveness to current market dynamics.

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These offerings distinguish us and our community correspondents from commodity, mortgage-only, lenders. They also help us support our real estate partners to better serve their clients.

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We’re excited about potential partnerships to address the evolving mortgage market in 2025. We’re here as a resource and a partner, eager to explore opportunities together next year.

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Thank you for your continued partnership and trust in Leader Bank.

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Sean Valiton - Head of Residential Lending

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The Weather Forecast

CPI inflation readings for the month of October were released this week with headline CPI increasing by 2.6% over the prior year, and 0.2% from the prior month.? While CPI was up slightly from the prior month’s annual pace this was in line with expectations due to the price level of a year prior.? Core CPI, removing the more volatile food and energy prices, rose by 0.3% from the prior month and 3.3% from the prior year.? Energy prices have been declining recently, which is helping to lower the headline inflation readings, while housing costs are remaining high and keeping core inflation readings higher. Housing costs are up 4.9% over the past year, and expected to remain challenging as home prices and interest rates remain high.? Additionally, since the election results, the bond market has been moving to higher yields as the expectations around President Trump policies on tax cuts, tariffs and immigration while thought to be positive to economic growth are also likely going to put pressure on inflation.

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October retail sales also were reported to the higher side of expectations this week, coming in at a 0.4% increase from the prior month and growing at a 2.8% increase over the past year, topping economists expectations.? September’s reading was also revised higher to 0.8% from 0.4%.? The American consumer is still displaying upbeat spending momentum, despite the accumulated runup in costs as items like grocery expenses are up more than 20% since prior to the pandemic.? Speaking this week Fed Chair Jay Powell noted “the strength we are currently seeing in the economy gives us the ability to approach our decisions carefully” and adding that “the economy is not sending any signals that we need to be in a hurry to lower rates.”? The Fed is balancing the risks to the labor market slowing along with balancing remaining too restrictive for too long or slashing rates too quickly and reigniting inflationary pressures.? Markets are largely mixed on current expectations for a rate cut at next month’s FOMC meeting on December 18th.? The Fed has been quite transparent with markets that it does not know the exact neutral rate target, but rather that current rates are too restrictive and it must gradually lower to find balance.? This has been evidenced this week with Fed speakers such as Kashkari (Minnesota), Logan (Dallas), Musalem (St. Louis) and Schmid (Kansas City) all noting that the path toward ultimate rate destination is unknown aside from everyone agreeing that neutral rate is lower than the FOMC’s current Fed Funds rate.? Boston Fed president Collins noted that a rate cut in December is “certainly on the table, but its not a done deal,” and further reminded markets that the Fed will continue to act data dependent.

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So what does this all mean? The market concern over the uncertainly of future policies from the incoming administration has driven up bond yields in a flight to safety.? Equity market excitement from last week has pulled back and equity markets are on pace for a weekly decline following the post election runup.? With economic data continuing to point to a strong economy its unclear how much stimulus the market needs via lower rates to maintain solid footing – there is little economic data to suggest rates should be lower (aside from struggling home affordability).

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Patrick Sylvester - SVP, Capital Markets

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The Work Room

Anyone with two or more children understands the importance of balancing their needs and interests to keep the family on an even keel. For the last few years, we have become comfortable with the reliable child…the Purchase mortgage. We all know that making Purchase mortgage loans is complex, with extensive guidance, requirements, documentation, and crucial deadlines. The deadlines also make the origination process predictable with a goal to finish within a defined rate lock period due to set dates on Purchase & Sale contracts.

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Purchase mortgage borrowers are highly motivated and receive extensive coaching and care from the loan officers, realtors, and processing staff. Many buyers rely on us to guide them through to closing on their new home and are generally committed to sticking with the relationship.

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Recently, after several years away, the wild child, Refis, banged back through the front door.? Within a few days, many of their demanding friends showed up too.? In late August, Leader’s weekly rate lock volume doubled almost overnight and caused the usual friction with the reliable Purchase mortgage child. Sure, the wild child may not need as much support, but they are also not as motivated by deadlines and can decide to run away to the competition on a whim.? And they expect their transactions to close within thirty days. How do you get them on a schedule and plan for food and sleeping accommodations, so they don’t leave early in a huff? How do you keep the whole family rolling along efficiently without hiring too many sitters, expanding the house, or buying too much takeout?

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Each time the wild child comes home, we learn a bit more about how to deal with them. Four years ago, Leader increased investment in systems to streamline the refinance process.? For example, we used to alert borrowers to unmet requirements through freeform emails written by individual loan officers, underwriters, and processors.? That approach was personal, but variable, error prone, and slow. Now we have standardized workflows embedded in our loan origination system. Bank team members tick off outstanding items in a centralized portal to generate a comprehensive request to borrowers along with the reference material they need.? This step initiates a visible status queue that can be monitored by borrowers and bank staff alike.? It has made it much easier to manage our diversified pipeline and balance the workload for our staff efficiently.

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The wild child has quieted down in the last week or two, but more fickle friends are waiting around the block for the next significant rate change. Who can predict the economic or political events that could trigger another Refi boom in the next year?? Leader is focused on investing in systems and staff to keep the residential loan “family” happy for the long haul.

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Alex Clarke - SVP, Residential Lending

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Leader Bank is a major residential lender in New England with a growing presence around the United States. We partner with community financial institutions to help them grow their mortgage portfolio and customer base. For more information, please contact Steve McHugh, VP Community Bank Relationship Manager through 781-544-2648 or [email protected].

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The content of this publication is provided for informational purposes only and is not intended to recommend any financial decision or course of action.? Any financial and investment decision should be made in consultation with your financial advisors and representatives and should be evaluated at your own risk.