Mortgage exec: Lower rates, ‘big refi move’ coming in 1-2 years 

This year's epic rise in mortgage interest rates has been one of the main culprits behind declining home sales and extremely tight inventory. But with rates approaching the 8% threshold, an already strained market could soon encounter a new milestone.

What does this mean for real estate professionals? Will rates come down in the near future? And how is the mortgage business changing to meet ever-evolving consumer preferences?

Real Estate News spoke with Greg Schwartz, co-founder and CEO of cloud-based lending platform Tomo, about these themes and more. Before founding his mortgage startup, Schwartz spent 13 years at Zillow and was a key figure in developing Zillow's Premier Agent business. 

He shared his thoughts about the impact of elevated mortgage rates on the industry and agents, and discussed his transition from the agent business to the lending business. This interview has been edited for length and clarity.

What would 8% mortgage rates mean for the industry?

Even at an 8% mortgage rate, there's still a surprising number of people that are moving because they're having a baby, they got a new job, they want to retire, or someone passed away. There are 3 to 4 million of these life-stage driven moves that happen every year regardless of rate.

And say you get an 8% rate — it's not forever, right? I think all of us reasonably expect rates to come down in a year or two. Is it reasonable to expect rates in the 6's and 7's? Yes. And there will be a big, big, big refi move at that point which will bring down monthly costs. 

But my gut is that none of us expected we were going to pass the magic 8% mark. We have to see inflation moderate. And unfortunately, the Fed wants to see the job market lighten up. As soon as we see the job market lighten and inflation flatten out, you'll see a half to three quarters of a point fall off this mortgage rate. Fast. Like we'll be in the low sevens in a blink, because the spread is historically wide right now. 

What impact do these high interest rates have on agents in particular?

I think we're about to see a real rush toward quality and "superhero agents" who can help a buyer navigate this market. Buyers need to be selecting the right financial products, the right mortgage products and getting the lowest possible rate with the least amount of fees. They need someone who's a world-class expert in negotiation and offers because it's a pretty competitive listing market. 

This is not an environment for the newbie or the casual agent. I think you'll see agent counts start to really take a hit for the first time in a while. 

You mentioned the importance of finding the right mortgage products. How is Tomo different from other lenders?

We have a mortgage experience that reflects how people live their lives. For the modern homebuyer, they can go on and connect their accounts, their asset statements, pull their credit, and get an underwritten pre-approval without ever talking to someone if they want to do it at midnight. 

We also don't charge any lender fees. We have competitive rates and we build our profit into that. Because there's no hidden fees — or "lender junk fees," as they're often called — the customer typically saves $1,500 In closing costs, because we're building this for efficiency and for scale, and we're using technology to reduce costs. 

We offer an appraisal coverage guarantee, so in the rare instances that the appraisal comes in low, we will cover the difference. And we can lock a rate for 120 days if folks want to, which allows customers to shop for a while. That's been confidence-building for folks.

Why did you decide to get into the mortgage industry?

Many of us at Tomo spent over a decade working on Zillow's portal business. We felt there was unfinished business around helping to improve the real estate transaction, which causes people lots of worry — those people are real estate agents, loan officers and home buyers and sellers. 

Our insight is, you can't fix the real estate transaction until you address the catastrophe of the mortgage. And that's what we call it — the catastrophe of the mortgage. It unmoors folks. In their most vulnerable moments, it makes them feel out of control. 

The internet's been pretty focused on selling leads and not solving problems. Our job at Tomo is to smooth out the very jagged edges of the mortgage process to make this a more predictable, less stressful experience for agents and for consumers.