Articles
How Mortgage Servicers Can Navigate Rising ARMs Successfully
Demand for adjustable-rate mortgages (ARMs) is higher than it has been in more than a decade. ARM volume hit a 14-year high in May, when the MBA reported that ARMs made up nearly 11% of all mortgage applications. At the beginning of this year, that percentage stood at only 3%. One lender is now seeing pipelines made up of 70% ARMs.
An increase in ARMs means that mortgage servicers have additional factors to consider when servicing loans. Servicers must account for the recent changes in interest rate calculations with the shift away from the London InterBank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR).
Most servicers have mortgage servicing software in place that helps them service adjustable-rate loans. However, the way servicers deal with an increasing number of ARM loans in their portfolios combined with their approach to shifting from LIBOR to SOFR will set the industry leaders apart from the rest.