Renewal Realities

For the past few years I've listened to endless discussion about the 'massive wave of renewals.'

From time to time I've tried to rein in the delusional chatter with a conversation that includes a couple things:

Reality.

Basic math.

Alas, too much focus on these two topics may not see you invited back to dinner.

Best to say nothing at all sometimes.

Let people live in their delusion.

I've heard every inflated number imaginable about how many mortgages are coming due.

Lately, the next twist in the plot is that 'the renewal wave ends in 2027.'

Which is fascinating.

Apparently nobody closed a 5-year term in 2022?

Apparently nobody closed a 3-year term in 2024?

More delusion.

Refer back to:

Reality.

Basic math.

Never mind how many mortgages will never make it to maturity anyways. (~60%)

Never mind lender retention rates that routinely sit north of 90% come renewal time.

Never mind reality.

I often write 'What Matters?' at the top of a blank page.

Then I list the 3 key things that need to get done that day.

I've never written 'Reality' on the list as something I need to pay attention to.

I've never written 'Basic Math' either.

I don't need to.

These seem like givens, no?

But maybe we need the reminder, because somewhere along the way we were left with the implication that millions of mortgages were somehow about to become available to mortgage brokers.

False.

Let's start with a basic fact:

Six out of ten mortgages never make it to renewal.

The client sells.

The client refinances.

The client separates.

The client moves.

Life happens.

The mortgage disappears long before maturity.

So right out of the gate, 60% of the opportunity everyone keeps talking about is gone.

Then we get to the remaining 40%.

Of those, roughly 95% will renew with their existing lender.

Just as they always have.

• No appraisal

• No legal fees

• Amortization extended back to contract, sometimes beyond (Even a 40-year still exists at big bank... quietly)

• All at a rate you cannot touch

• No qualification

• No paperwork

• No friction

• One phone call

Done.

The lender knows this.

The client knows this.

You know this too, you must.

Yet somehow the industry keeps talking about renewals as though renewals are low-hanging fruit.

They are not low-hanging fruit.

Never have been.

Never will be.

Meanwhile, too many brokers seek to avoid the one thing that has always created business:

Conversations.

The people getting married.

The people getting divorced.

The people getting transferred.

The people having a child.

The people buying a rental.

The people buying a summer place, a winter place.

The people whose financial lives are changing.

These people create transactions.

Renewal dates create spreadsheets and marketing campaigns that go nowhere.

One generates revenue.

The other generates hope.

Or perhaps revenue for the marketing company.

Stop chasing renewals.

Start chasing conversations.

Because in conversations we discover life changes.

And it's in those life changes that mortgage transactions are found.

Not in maturity dates.

Now, if you've read this and you're saying, 'No way Dustan, switches are 10%, 20%, 30% of my book.'

Trust me, you are an outlier.

Ask your managing broker.

Ask five broker friends.

Ask an underwriter.

If a brokerage sees 5% of its volume as switch transactions, it is outperforming the industry.

Focus on what matters.

Make your calls.

DW