What mortgage lenders are doing to limit contract cancellations

Buyers are pulling out of purchase contracts at an alarming rate — reaching an eight-year high in July. HousingWire spoke to several lenders about how they are tackling the problem on the front end to prevent contracts from going south.

Experts say the surge in collapsed deals stems from soaring home prices, steep borrowing costs and broader economic instability. And, as inventory and new construction climb back up, buyers have the freedom to explore new options, leaving many to lose their confidence in what they thought was the “right” option.

Mark Worthington, branch manager at Churchill Mortgage, says that buyer preparedness —or lack thereof — is a factor leading to canceled applications. “With newer loan officers…they tend to start a lot more loans that maybe shouldn’t have been started, where they should have taken a step back and educated first,” he said.

Worthington, who has been in the mortgage business since the 1990s, says that the call-center atmosphere pressures LOs to put deals through whether a buyer is ready or not. “And what I’ve seen is with the proliferation of a lot of online mortgage lenders, they hire licensed loan officers, yes, but they’re often more like phone solicitors, and they’re just initiating and starting more and more loans because of the pressure and the sheer number of phone calls people get when we start a loan now,” he explained. “Hopefully, the passage of the trigger leads bill will reduce that.”

What’s the real reason buyers withdraw?

Most terminated applications are officially logged as “buyer withdrawals,” but that isn’t always the real reason, Worthington said. Sometimes approvals fall through because buyers simply didn’t provide additional paperwork.

Finding a loan officer who is the right fit could also influence how application withdrawal data is interpreted. “A lot of cases are withdrawn, yes, but I’d be curious what percentage were closed by somebody else,” he mused. “It’s not uncommon for a client nowadays to start an application with more than one loan officer.”

Sam May, an area manager for All Western Mortgage, says it’s discouraging for both the loan officer and the buyer when the numbers come back different from what they each expected. “[The buyer] gets confused and frustrated — then walks away,” he said. “The bottom line is, confused buyers don’t buy.”

Nick Friedman, president of homes at HomeLight, says that lenders and LOs are dealing with two types of buyers: those who can’t afford current rates and those who are expecting rates to drop at any moment.

Recent hints at a September rate cut have caused buyers to think they need to act fast, Friedman said, which is why it’s important for lenders to present the options to refinance later or use equity for a rate buy-down.

“I think a group of people is saying, ‘I don’t want to make this monthly payment. It’s too expensive.’ And there you have a group of people saying, ‘I’m fine with this, but I can afford more later, and I’m just going to wait a little bit,’” Friedman said.

Some lenders, like Worthington, wonder whether trigger leads have an impact on the cancellation data. Friedman thinks that it’s borrower curiosity. “There are probably a lot of people who are inputting information just to test the waters in the market of what their monthly payment would be or types of homes they could afford. I think it’s a lot of people who are interested in that, but have no intention to follow through,” he said.

He continued, “I think for me, what’s more interesting is the number of people who actually go under contract and then cancel. If you’re gonna do all the work to get an approval letter, find a home, go under contract with a seller and then cancel your transaction, I think that’s where it becomes a little bit more interesting.”

Preventing the cancellation rate from growing

Application fallout seems to be a growing problem. A July report from Cotality found that 16% of buyers “ghosted” their mortgage applications in 2024, and a recent Redfin analysis of MLS data, released last week, found that 58,000 agreements fell through during July 2025.

According to Cotality’s report, buyers said they don’t want to rush through the mortgage process, especially if they are first-time homebuyers. That sentiment is causing lenders to pivot and change their approach.

“I think the pressure for the lender is just to ensure that the client is comfortable with what they’re doing earlier on in the process,” Friedman said. “I think historically, a lot of lenders try to move forward as fast as possible. But in today’s market, it’s a lot harder for buyers to commit and continue.”

Friedman said loan officers can boost their success by offering a range of loan options — such as incorporating crypto assets, exploring home equity access and tailoring the loan to fit the borrower’s comfort level.

“As an industry, regardless of market conditions, we don’t do a good job helping buyers explore all their possibilities,” May admitted. “We’re addressing this by [sending buyers a] presentation [that] includes a 10-minute video walkthrough of three different loan options, plus interactive charts that help buyers digest the data and make informed decisions.”

Ultimately, the responsibility is on the buyers’ end, too, Worthington says. “Buyers who are actively educating themselves, starting the process and the planning, not the day they want to buy a house, but one month, three months, six months before they plan on buying a house, they’re actually they’re actually having a high level of success, because patience and education are key.”