Lending

How to Engage Your Customers About the Fed Rate Cuts

5 mins read
November 18, 2024
By
Mike Waterston

The Fed rate cuts that hopeful homebuyers were waiting for are finally starting to materialize. Yet, mortgage rates haven’t immediately fallen. In fact, mortgage rates ticked up a bit in October after the first rate cut in September.

Homebuyers are anxiously wondering what’s going on—and what’s coming next. This presents a huge opportunity to earn their trust by providing education, guidance, and insights into what they can expect from the housing market in the coming months.  

Mortgage lenders and loan officers (LOs) need to engage potential homebuyers to help them understand the complex dynamics and nuances of our industry. They need to help them feel (at least a little) more comfortable with what to expect. Earning their trust today will help lock in their business when they do make a mortgage-related decision—whether it’s their first home purchase, an upsize or downsize, or a long-awaited refinance.

Borrowers and homeowners want an expert they can rely on to answer their questions and offer guidance on the complicated mortgage market. Loan officers need to be able to speak as this kind of expert authority on factors influencing mortgage rates, as well as the broader housing market.  

This blog will cover:

Explaining the “Fed rate”?

While this might be “Mortgage 101” to you, most people only have a general understanding that the “Fed rate” is important in shaping the interest rates that consumers see on mortgages and other loans. So, it can be helpful to provide your customers with a broader definition and discussion of what the “Fed rate” is, and how the Federal Reserve thinks about its decisions to raise or lower that rate.

The “Fed rate” is the federal funds rate—the interest rate at which banks lend money to each other overnight to meet reserve requirements set by the Federal Reserve (the U.S. central bank). The Fed rate is one of the Federal Reserve’s only tools for fulfilling its “dual mandate” of maintaining stable inflation and maximizing employment.  

By lowering the rate, the Fed can stimulate borrowing, spending, and hiring during economic slowdowns, boosting employment. Conversely, by raising the rate, the Fed can cool down excessive borrowing and spending, helping to control inflation when the economy is overheated.  

But this is a delicate and extraordinarily difficult balance to achieve. The Fed rate is an admittedly “blunt” tool for influencing economic stability. And Fed rate changes have an infamous “long and variable lag,” meaning the impacts take months to play out.

Why Fed rates don’t directly drive mortgage rates

The Fed’s decision to cut rates in September and November 2024 undoubtedly included hopes of easing the unprecedented tension in the housing market. But there are several reasons why mortgage rates aren’t following Fed rates on a linear basis:

The mortgage market already priced in initial Fed rate cuts

The Fed began signaling its intention to cut rates way back in December 2023. Experts debated the timing and size of those cuts through most of 2024, but the sense of inevitability only grew stronger—peaking in August as evidenced by some anticipating emergency rate cuts and others predicting a massive .75% cut.

Many mortgage lenders took calculated risks by lowering their rates in advance of a likely Fed rate cut. The goal was to capture constrained homebuying demand by being among the first to lower their rates. By the time the Fed rate cuts were announced on September 18, most lenders had already priced in that initial .5% drop.

In other words, the mortgage market does not always respond to the federal funds, but rather anticipates where that rate is headed in the near future. This naturally leads to the other two macroeconomic factors that have actually pushed mortgage rates higher since the Fed’s September rate cut.

Employment data indicates a strong economy

Jobs reports in the U.S. continue to exceed expectations, signaling broader economic strength. This strong job market persists in spite of geopolitical and macroeconomic headwinds and in defiance of both historic norms and expert-predicted slowing.

Mortgage lenders look at employment data as a sign of where demand will be in the coming months. A strong economy puts no pressure on lenders to lower mortgage rates. Moreover, employment data is also a reliable indicator of what the Fed will do with its rates in the coming months. If the job market remains hot, the Fed may hold off on additional rate cuts (and rate hikes may even re-enter the conversation).

Inflation has stagnated

We’ve come a long way from the surging inflation we saw 18 months ago. Inflation now sits relatively close to the Fed’s 2% target. But experts always warned the “final mile” would be the most challenging.  

The mortgage market looks at inflation as a signal of what the Fed will do next. Fed officials made it clear throughout 2024 that they’re anxious about easing up too early—and they’re firm on their 2% target. So, stubborn inflation may contribute to a decision to hold off on further rate cuts in the near future.

Demand remains low in the mortgage-backed securities market

Mortgage lenders view mortgages as financial products and one of the main ways they realize value on these products is through the sale of mortgage-backed securities (MBS).  

As a result, mortgage rates can be heavily influenced by investor demand for MBS: When MBS are in high demand, lenders can realize higher yields. So, they’re incentivized to lower mortgage rates to drive mortgage volume and capture those higher yields.

Right now, inflation and other factors (even lingering effects from the 2008 housing crisis) are keeping demand for MBS relatively low. So, the MBS is not putting any downward pressure on mortgage rates.

What to watch: 10-year Treasury yields signal mortgage rates

Admittedly, the four factors above are just part of what’s influencing mortgage rates. The complex interplay of various factors is hard for even experts to untangle and reliably predict.

The best advice you can give homebuyers wondering where mortgage rates are headed: Watch the Fed’s 10-year Treasury yields. This figure provides a reliable shortcut to anticipating mortgage rates, rather than trying to calculate the relative influence of various macroeconomic factors on their own.

That’s because mortgages are long-term investments. So, the mortgage market values long-term indicators over short-term signals. The federal funds rate is considered a short-term rate (for the aforementioned overnight borrowing between banks). But the 10-year Treasury yield is one of the most reliable long-term indicators. It incorporates investor sentiment about future economic strength, global economic trends, and inflation expectations.

Right now, 10-year Treasury yields remain high by historic standards. After peaking in late 2023, they hit a recent low in mid-2024 and climbed back up in recent weeks. We’ve seen mortgage rates take a very similar path over the last year.

How education now can build loyalty for later

Loan officers are likely frustrated that long-awaited rate cuts haven’t resulted in a massive surge in homebuying. And they’re certainly not excited to see mortgage rates ticking up recently. But these pains his potential homebuyers even harder.

The best strategy at the moment is to lean into an empathetic approach: Recognize that homebuyers are feeling even more frustrated and confused by the mortgage market. This presents a tremendous opportunity to meet homebuyers where they’re at—engaging them with helpful education on what’s happening in the mortgage market right now.

Providing this much-needed support and guidance around how and when the Fed rate will impact mortgage interest rates can build invaluable trust and sow the seeds for long-term loyalty. So, when the time is right, you’ll be their first call.  

How Will the Federal Reserve’s Interest Rate Cuts Impact Lenders?

Hear what Total Expert Founder & CEO Joe Welu and Chief Lending Officer Dan Catinella think lenders and loan officers can expect if rates continue to drop on the Expert Insights Podcast >

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The problem with doing the same thing “faster"

For years, lending organizations have measured technology's value by a simple test: did it get people to log in and complete a task? New dashboards, new buttons, and new workflows all designed to change human behavior just enough to extract a little more efficiency from the same process.

The catch, Welu explains, is that this approach caps out at the limits of human behavior itself. A loan officer forgets to follow up. A call center rep runs out of time in the day. A relationship goes quiet not because anyone did anything wrong, but because relying on people to be perfect and predictable was never a sustainable strategy to begin with.

What breaks when the old ceiling stays in place

Joe used an analogy at the 2026 HousingWire AI Summit to capture the stakes: a farmer who just got a bigger, faster horse looks to the neighbor’s field and watches them ride by on a tractor. Incremental improvements, like faster horses, were the best option for decades. That's not the case anymore.

The risk isn't hypothetical. We still see lenders asking AI to slightly improve an existing workflow, rather than asking what their workflow should look like with AI built in from the start. And the lenders who are still chasing incremental improvements will find themselves outpaced by competitors who were willing to embrace a new mindset, a new strategy, and new era.  

Joe also highlighted that speed and speed alone will not set you apart. Context will be the critical differentiator in an AI-enabled world. Being the first one to engage a borrower is great, but only if you actually have something to talk about. Historically, a legacy database only knew what a person remembered to type into it. If that information wasn't captured, the system, and the loan officer, wouldn't be able to use it for the next conversation.

Context is king, and the mindset shift that gets you there

This is where Joe took the conversation from diagnosis to direction. Total Expert's Customer IQ continuously aggregates zero-, first-, and third-party data to create a complete financial profile and interaction history for every customer. This provides lending teams with the context they need at the exact moment it matters, whether that's to a loan officer having a conversation or an AI agent handling a task automatically.  

To put things in a perspective that everyone can understand, Joe drew a comparison to how streaming platforms already personalize recommendations based on what the user has watched or listened to previously—i.e., context. When that context is missing, it's obvious and often frustrating. He argues borrowers feel that same disconnect when their lender's outreach doesn't reflect where they actually are in their financial journey.

This level of change doesn't happen without friction. There will be individuals, teams, and even entire organizations that resist this shift. But leaders have to be clear-eyed about the realities of how our industry is evolving and, more importantly, how consumer expectations are driving that evolution.  

The reframe Joe’s pushing lenders toward is to stop measuring success by tasks completed, and start measuring it by the lifetime value of the customer relationship. He calls this “turning relationships into appreciating assets," where organizations never lose a customer and continually find new ways to add value to that relationship over time, rather than treating every interaction as a standalone transaction.

The takeaway

AI doesn't create value on its own. It creates value when it's grounded in real customer context, embedded in the actual workflow, and pointed at a bigger goal than getting a task done faster. For lenders willing to rethink the engine itself, Welu says the payoff isn't incremental. It's the same seismic shift that farmers experienced when they realized that even the slowest tractor was more efficient than the fastest horse.

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That's the insight USA Mortgage discovered when they partnered with Total Expert to transform how their originators identify, nurture, and convert past customers into new opportunities. The result? ~$60 million in funded loan volume in just six months, plus another $175 million in pipeline.

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The problem: leads disappearing in the middle

Walk into any mortgage lender, and you'll find the same story. Loan officers are smart, they work hard, and they have plenty of leads coming in from multiple sources: referral partners, purchased leads from Zillow and LendingTree, and their own past customers.

But somewhere between the lead arrival and the follow-up, opportunities vanish.

USA Mortgage's VP of Sales and Customer Experience, Alec Picinich, described the friction this way:

"We had strong loan officers and plenty of lead activity, but the handoff was the issue. There was no uniform system in place. Most producers had their own system—reminder-based inbox notifications, spreadsheets, personal call lists. The lack of centralization was the biggest issue. The gap was in the middle, where the opportunities kind of just disappeared."

All those disconnected systems led to inconsistent follow-up and limited visibility into what was working and what wasn't. And with no way to nurture borrowers who weren't quite ready today but might be ready next month, those opportunities got buried deeper and deeper under waves of new leads.

The result was predictable: lost deals, confused teams, and a corporate support function with limited ways to help scale best practices across the organization.

The Solution: one source of truth

Rather than layering on more tools, USA Mortgage decided to consolidate. They brought all their leads from referral partners, purchased sources, and past customers into a single unified platform: Total Expert's Lead Management.

But consolidation was just the first step toward preventing leads from slipping through the cracks. The real shift came when they connected three capabilities:

1. Customer IQ: identifying opportunities in your existing database

Most loan officers don't excel at proactively reaching out to past customers. They're focused on today's purchase business, and without a system to surface opportunities, past borrowers fade into the background.

Customer IQ changes that. It's a contextual data system that continuously monitors and enriches every contact record in your database. When a borrower experiences a life or market event that creates an opportunity such as a rate drop (refinance window), a credit inquiry from another lender, a debt threshold crossed, a marriage or divorce, Customer IQ spots it and brings it to your team’s attention.

At USA Mortgage, this meant monitoring 190,000 customers and turning insights into action. In just six months (January–June 2024), those customers generated:

  • ~$60 million in funded volume
  • $175 million in application pipeline (with expected 80% funding conversion)

That's an opportunity that was already sitting there; it just needed to be seen.

2. Lead Management: centralized workflow and accountability

With Customer IQ surfacing opportunities, USA Mortgage needed a system where loan officers could manage those leads the same way they manage purchased or referral partner leads.

Lead Management provided:

  • A single source of truth for all leads (past customers, referral partners, purchased leads)
  • Clear visibility into lead stage and action items
  • Consistent routing based on originator or branch
  • Automated nurture campaigns for borrowers who weren't ready yet
  • Compliance controls to ensure messaging is consistent and compliant

Suddenly, loan officers could answer three simple questions about every opportunity: Who is the lead? What do they need? Why is the opportunity present right now?

That context—that "why"—changes everything. It's the difference between a cold check-in call and a conversation-ready outreach.

3. AI Sales Assistant: outreach on demand & at scale

Even with a unified system and better intelligence, loan officers still can't personally call every past customer when the market shifts. If rates drop and 1,000 borrowers become in-the-money for a refi, even the most efficient lending teams can't operationalize that in the two or three weeks when the market window is open.

Enter AI Sales Assistant, a human-like voice AI that’s powered by Customer IQ’s contextual data and trained on real-world mortgage conversations so it can answer questions, navigate borrower objections, and qualify opportunities.

AI Sales Assistant acts as an extension of lending teams by:

  • Initiating outreach to all qualified past customers (potentially in a single day)
  • Personalizing the conversation based on the borrower's situation, previous transaction, and estimated savings
  • Handling objections gracefully (Alec shared the story of a borrower who said "I'm feeling sick, not a good time.” AI Sales Assistant responded with empathy and offered to schedule with the loan officer later, which the borrower accepted)
  • Offering warm transfers to the loan officer for borrowers ready to talk
  • Scheduling meetings on the originator's calendar for qualified leads

This allows loan officers to focus their time on high-quality conversations with informed borrowers, not figuring out who to call or manually working through a database.

Real-world execution

One of USA Mortgage's senior regional VPs shared a success story that perfectly captures the shift:

An experienced loan officer received a credit inquiry alert for a past customer; someone she hadn't worked with in years. The borrower had lost the loan officer’s contact information. But thanks to the alert surfaced by Customer IQ, the loan officer reached out with context and relevance.

The result? A $400K pipeline boost with minimal effort from the loan officer.

This doesn't happen with a generic check-in call. It happens when the loan officer knows why they're calling and has the data to back it up so the outreach feels timely instead of transactional.

The bigger picture: human + AI operating model

What USA Mortgage discovered is that the future isn't human or AI. It's human + AI.

The loan officer remains the relationship owner and builder, the decision-maker, the one who earns trust. But now, they're equipped with:

  • Intelligence about who to engage and why
  • Automation handling the high-volume, time-sensitive outreach
  • Consistency across the entire organization
  • Tools that make their job easier, not harder

Three takeaways

If you're struggling with lead follow-up, originators working in silos, or deals slipping out the back door, here's what to focus on:

1. Strong lead management isn't just about speed—it's about long-term nurturing
Speed matters for converting hot leads, but most conversions happen in the follow-up. Build a nurturing strategy that keeps borrowers engaged from first touch through the next opportunity to serve.

2. Your database is your biggest opportunity; operationalize it like a referral partner lead

‍If you're not connecting data intelligence with lead management, you're leaving deals on the table. Treat past-customer insights with the same urgency and structure as a purchased lead or referral partner referral.

3. Build an enterprise strategy with human + AI models

‍Replace ad-hoc originator habits (spreadsheets, personal reminders, disconnected systems) with a unified, AI-assisted operating model. Consistency across your sales force is what unlocks scale.

Watch the full conversation

Hear how USA Mortgage is using Total Expert to solve their lead management challenges, develop a better understanding of their customers, and engage opportunities at scale.

Ready to explore how a human + AI operating model could transform your originator productivity and customer conversions?

Reach out to your Total Expert Customer Success Manager or book a demo with our team below!

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