As the industry sheds the dust of a year like never before, the mortgage industry has weathered the storm with flying colors, having experienced a record year in terms of both volume and origins.
Adapting and surviving is nothing new for an industry constantly affected by change. Getting through the change and adapting to what lies ahead was the subject of the last episode of the MReport Webinar series, titled “A look at the lending landscape – from home equity to changes in refi. ” Presented by Altisource, the discussion covered a number of topics, ranging from home values, home equity loans, eClosings, refi changes to origins, and more.
Moderated by Steven greenfield, General Manager of Mortgage Real Estate Solutions for Altisource, the discussion featured contributions from industry experts, including Kevin J. DeLory, SVP Wholesale & Correspondent for Carrington Mortgage Services LLC; Jeffrey Leinan, TEU, National wholesale production for Plaza Home mortgage; Rick sharga, TEU of RealtyTrac; and Jason wright, Director of eMortgage Services for Lenders One Mortgage Cooperative.
It’s safe to say that 2020 has been a year for the record books, a year in which the housing market has thrived. The historically low rates have resulted in both buying and refitting, but nothing lasts forever and as Sharga noted in her opening presentation, rates are climbing again past the 3% mark, so that the spread between 30-year mortgage rates and bond yields returns to normal. patterns.
“As those rates go up, the refi volume goes down because the rate dictates the refi opportunities and they dry up,” Sharga said. “This has implications for the housing market in terms of what economists call ‘rate foreclosure’. People are reluctant to sell their property because they would pay more for the new property, and they would have a higher interest rate in terms of monthly payments. Rate and refi work in tandem. As we saw rates go over 3% a few weeks ago, we saw refi volume drop significantly. I think this is something we can expect to see over the next year at 18 months. “
As refi volume declines, buying activity remains at an all-time high, as bidding wars are waged over the shortage of high-demand housing. As Sharga pointed out, the United States is running out of two million properties just to get back to normal sales inventory levels.
“Demographics are the main reason,” Sharga said of the surge in demand. “The median age to buy a home is now in their early 30s, and the largest group of Millennials are quickly approaching that age. Low interest rates improve affordability, and in more than half of the country’s markets, paying a mortgage on a monthly basis is more economical than paying rent. “
With the refi market drying up, rates rising and stocks tight, panelists discussed what the industry can do to keep pipelines full in the event of a major mortgage reshuffle.
“I think it’s important that designers do a number of different things, like expanding their reach and product options,” said Leinan. “When we talk about reach, maybe it’s not your traditional refis falling from the tree, but maybe its reverse mortgages. Now we have to adapt. The only thing that is constant in our business is change, so now we have to adapt to keep going. There may be a big drop this year, but that doesn’t mean the initiators can’t do the same things they did last year, they just need to adapt, focus, and change. . “
One of these changes is the expansion of product offerings. Offerings like reverse mortgages, jumbo loans, and non-QM loans have overtaken the traditional 30-year fixed rate in 2020, but panelists see diversification as a way to excel in 2021 and beyond .
“Look at the changes GSEs are making to investment properties and second homes,” DeLory said. “There’s going to be a need for that with the non-QM. There is a need for this product if it is done the right way. We need to offer our partners and brokers something different to stand out. We pulled a lot of them a year ago when the non-QMs were here. Hopefully we can get them back into the game of buying their next home. There are good, responsible loans that can be made in this space and with rates rising, now is a great time for non-QMs. “
Sharga added, “The reverse mortgage category will grow as baby boomers age, and it’s an underserved market right now populated with businesses borrowers have never heard of. This is an interesting aspect to pursue for some companies. “
The pandemic may have brought the concept of social distancing to the world, but in turn, the advent of this new concept has forced the industry to adapt to change the ways it maintains the ‘status quo’.
“If 2020 teaches us anything, our work environment will change forever,” said Wright. “I don’t think we’ll ever get back to the way things were. There is a large percentage of people who will continue to work remotely on a permanent or part-time basis. I think we’ve learned that people can be just as efficient in their working day from home instead of going back and forth to their desks. “
The adoption of new technologies has also fueled the growth of eClosings, as face-to-face meetings and even property tours have become a thing of the past.
“It’s all about ease of use right now, and we want to make it as easy as possible for the borrower,” DeLory said. “I would have liked to have offered more eClosings, unfortunately for us at Carrington, most of our business is government loans that require wet signatures on a lot of documents. We are working to evolve with a hybrid model where most documents are signed online. “
Wright added, “I think the past year was the catalyst that many lenders needed to get started in eClosings on the right foot. The number of eClosings has increased since this time of last year and continues to grow. Some of the obstacles that were in the path are knocked down and removed. It wasn’t that long ago that we were in a position where investors and warehouse lenders wouldn’t even buy a hybrid eClosing, but we’ve got past that now.
When it comes to foreclosures, the government took control of what could have been a problem spiraling out of control. Since many industries affected by the pandemic have sent countless Americans to unemployment insurance, keeping a roof over your head has been a major concern over the past year. Originally slated for late March 31, President Joe Biden announced a extension of the moratorium on foreclosures for federally guaranteed mortgages until the end of June.
“The military is going to be overwhelmed,” Sharga said. “There are currently about 2.5 Americans in forbearance plans. That’s 2.5 million Americans that servers have to work with. There will be a huge increase in call volume and server activity even if they are successful in back-end executions. “
Click here to display a record of the MReport webinar: “A look at the lending landscape – from home equity to changes in refi”.