With More Homeowners Refinancing, How Will Zillow Fare?

The Motley Fool recently visited Seattle, and went to online home and real estate marketplace Zillow (NASDAQ: ZG  ) . We met with Zillow Mortgage Marketplace Director Erin Lantz to learn more about how ZMM works and who it serves.

Because of its connection with Zillow, ZMM deals primarily with purchase loan requests. However, refinancing has its place as well; Erin points out that the system can even provide refi quotes for underwater mortgages.

To view the full interview, click here.

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Austin Smith: It seems like there's been a big boom in refinancing. I'm wondering two things, maybe; how that's impacting your mortgage arm, and what sort of trajectory you guys see in the refinancing boom, if you guys could comment on that?

Erin Lantz: Definitely, historically low mortgage rates have been a boon for refinancers. Zillow Mortgage Marketplace gets most of its traffic from Zillow, from people looking to buy homes, so we're actually mostly purchase loan requests.

We definitely see... refis are an important part. Underwater refinances are an important part of our business -- we're the only marketplace where you can get quotes for HARP or FHA Streamline if you're underwater -- but mostly borrowers on ZMM are looking for mortgages to purchase a home.

As the interest rates rise -- we expect rates to remain fairly low for the next 12-18 months -- but as they rise refis will fall down and we expect the purchase component to fill most of that gap. Again given where we stand, over indexed on purchase, we're pretty comfortable about how we can manage that transition.

Austin: What does that makeup look like? You said, obviously, as rates go up refis go down, maybe new purchases would go up. Is it a one-to-one comparison? How does that shake out, at least from what you guys see on the lead-gen end?

Erin: From an overall market perspective, I think if you look at the MBA they're forecasting the market would shrink somewhat but purchases will almost fill the gap left by refi, so the overall market will contract somewhat.

One of the X factors is the extension of the HARP program. Whereas much of the market was forecast to contract, I think extending HARPs from 2013 ending to 2015 is pushing out the length of the refi boom. But overall we think the market will contract somewhat, but purchases will fill much of the gap left from the refi market.

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