The Wall Street Journal’s September 30^th headline screamed “Fixed Mortgage Rates Hit Record Low”. The WSJ article (http://online.wsj.com/article/) went on to say:

“Fixed mortgage rates sank to record lows over the past week following the Federal Reserve’s decision to buy longer-term Treasuries, according to Freddie Mac’s weekly survey. The 30-year fixed-rate mortgage averaged 4.01% for the week ended Thursday, down from 4.09% the previous week and 4.32% last year. Rates on 15-year fixed-rate mortgages averaged 3.28%, down from 3.29% last week and 3.75% a year earlier.”

With rates this low, we are recommending to mortgage marketers our newly updated Prime Refinance Model. This is an in the market model that accurately predicts those homeowners who have an above market interest rate and are likely to respond to a rate/term refinance offer. The Prime Refinance Model is a non-FCRA product, so actual credit data is not used. However, there are credit and behavioral indicators in the model that identify customers that will have higher credit scores. Several large mortgage mailers have already tested the newest model release and are having outstanding results.

What ties these three things together? Economics! I was recently at a conference where John Silva the Chief Economist for Wells Fargo spoke. His main goal was to show you that even the slightest discussion of economics when doing planning for your company will go a long way.

Let’s link them up. Sovereign debt is the debt by the government of a sovereign state. The debt crisis is the fear that the debt will not be paid back, which in turn causes the interest rates on that nation’s debt to go up.

Now, mortgage interest rates here in the US have dipped down again. Why would this happen? As the Wall Street Journal tells us, all the investors with money to park somewhere are avoiding the instability in the Eurozone and are coming to the U.S.  The availability of funds is lowering our rates.

Finally, lower rates are creating a surge in applications yet again. This surge is mainly in refinance but purchase lending has gone up as well. In order to effectively lend you need to be targeting who you will lend to when you communicate with your customers and your prospects. These quick changes don’t give you time to build up a custom model for your targeting. You will need to use models that are already in place to ride this wave. You don’t know how long it will last and you can’t take the time to build custom.

What Altair has done successfully for many lenders is use a shelf model while gathering the data to either tweak the shelf model to perform optimally for your product or build custom. You won’t lose out on the burst in potential lending while you prepare for a sustained marketing effort.