As 2021 races by, it seemed fitting for me to ask some, “Where are we now?” questions. No, no, this is nothing like Where’s Elmo. Specifically, I wanted to know how a variety of mortgage professionals, with boots on the ground, thought this month was different from one year ago and what they expected to happen by year end, 2021. Therefore, my illustrious friends, former coworkers, compatriots, and associates produced this month’s blog content. Thank you pros!
This blog was NOT prompted by the somewhat related piece our friends at National Mortgage News recently published. However, I am using their predictive chart as a starting point of reference.
I asked a dozen or so mortgage professionals from Guaranteed Rate, TD Bank, US Bank, Prime Lending, PNC, Gibraltar Private, Stoddard Group International, Mountain West Financial, QFS Sales Solution, Germantown Title, and a few others too shy or compliance-related to name here. 😛 What do you think of their thoughts? What are your own?
What has changed since one year ago?
PBM, an MLO from a national bank, offered, “The differences that I see and feel between the markets are that last year I felt like I had a true breather from the holidays into the new year, and that I was ramping up my business for the “busy season” when January came around. This year, a part of me feels like I am holding on for the ride. There really has been a continual and consistent influx of buyers into a very heavy seller’s market. Most homes are going under contract for substantially more than list price with little to no seller concessions.”
“Lenders are concerned that rates went up much faster than they anticipated.” Pat Sherlock, QFS Sales Solutions, further noted that, “Refis are projected to be 25 to 35% less than 2020, stressing the need for purchase money volume to make up the gap.”
A manager from a large regional bank thinks, “The market has tripled with refinance business in the last 12 months. Purchases have again become a challenge due to the lack of inventory and anywhere from 3 to 30 offers per home driving prices up.
Rates have been extremely competitive with each lender trying to gain their share. Digital mortgages have become much more common, creating less documentation and quicker turn times for those that have embraced it.
Bottom line… Over the last 12 months this industry has become so saturated and competitive it is very difficult.”
From DM, a national bank mortgage manager, I heard, “The market is different this year vs. last year. There was a brief retrenchment at the beginning of the pandemic, understandably. Then, the housing market soared with low interest rates fueling the interest. The market lacked inventory for home sales, but the mortgage market experienced high volume and slight appraisal increases. NAR predicts home prices will rise by 3 percent in 2021.
Mortgage underwriting emphasizes qualifying the self employed borrower to expose impacts of the pandemic to their income and business. First time homebuyers and millennials have shown interest in housing and are influencers….”
A title company owner told me, “I think the mortgage industry has been impacted by COVID but not necessarily in a negative way. The interest rates are so low and the environment has changed drastically. More and more people are working from home. I personally have closed loans for people who are taking advantage of the low rates and enjoying the added value in their homes. Interestingly enough, although their homes are worth more, most people are NOT taking equity OUT but are lowering their loan amount or the term.”
Stoddard Group International sent me this, “We are seeing a lot more traffic for loans where income cannot be verified due to insufficient time being self employed or inability to document income. These "non-QM" loans have been slow to come back but are proving very helpful for situations a bit outside of the box.”
LKO, an MLO from a regional bank, stated, “Though the purchase market was "hot" last year, this year is even less inventory and overpriced. Too much demand and not enough supply.”
A VP at Mountain West Financial sent these comments, “As a whole we are busier for quarter but less than the previous quarter. Rates are starting to increase. Last year at this time it was a scary month. The influx had not happened yet. Last year at this time was expected to be a down market and folks were preparing for that.”
JG from a national bank told me, “There was uncertainty last year with regards to the unknown effects of the pandemic on the home purchase market. Market advisors like Jeff Otteau were recommending that homes which had been on the market for an extended period of time have their prices cut and get sold (particularly in price points where there was continued excess inventory). This year there isn't any inventory (at least in my market). This year in many of the popular price points (first time buyers in one city at $250,000 – 450,000; in another city from 700,000 to 900,000 ), we are seeing multiple bids, ‘highest and best offers’, escalation clauses.”
JL, an EVP at a national lender, told me, “The mortgage market is hotter this year. With rates ticking up, there are still lots of refis out there. That’s due to 1) wanting lower payments, 2) taking equity to fix up the home.”
A highly placed wealth management leader told me he is seeing much higher credit quality lately.
A sales EVP thinks, “Last year, no one knew what was happening, everyone was remote (and many had never worked remote before), and fear and confusion were prevalent. This year, people have adapted and done what they thought was necessary--moved out of large cities, established efficient home offices, refinanced to a lower rate, etc. Fear and confusion seem to have been replaced with frustration over delays and a desire to return to ‘normal’, if that is even possible.”
Remainder of the year:
P.S. opined, “With inventory and affordability issues, the remaining year will be challenging for companies to reduce costs to remain profitable. This change in market conditions will force lenders to invest in technology and train their originators on new selling practices such as video presentations and podcasting.”
A somber note ending from MLO PMB: “I don’t think the market will shift for at least a year. I believe that 2021 will end with the refinance transactions falling away and first time home buyers being priced out of the market.”
Our regional bank manager offered, “The industry will primarily move to helocs and I think the jumbo market will be very competitive. Unit counts will be about the same (maybe a little lower) as 2020 for the most part, however there will be about a 20% to 30% decrease in refinances. This loss will be replenished with new purchase inventory coming to the market.”
The national bank mortgage manager thoughtfully provided this: “It will be interesting to see the impacts of the new presidency and Federal Reserve. I expect interest rates to remain stable through 2021. The mortgage industry is experiencing efficiencies in processing and Underwriting due to technology’s support of Borrower verifications for income, assets and liabilities.
As I have said for years, people will continue to buy homes and use their house equity as the best form of ‘good debt’. Between death, divorce and relocation, the mortgage and housing industry will remain consistent, if not stronger, than in the recent past.”
Jumping to comments from a title company owner, she said, “I cannot predict where the mortgage market will be at the end of 2021. The real estate market is having a huge impact. With the inventory so low, fewer and fewer people are able to buy. I believe that as more and more people are vaccinated, the number of people selling their homes – at a much higher price point, the real estate market will turn around and in turn will impact the mortgage industry. My concern is that with the inflated prices we may see problems in the future with the resale of these homes. This in turn will impact the mortgage industry.”
LKO said, “If rates continue to rise, refi business should (thankfully) slow down. Though borrowers who have been sitting on the fence and could have had 2.75% have decided that 3.25% isn't so bad. But I think it will remain a seller's market through most of 2022.”
VP from MW contributed, “We expect to see higher rates than what we have become accustomed to. Although the purchase market heated up over, since the pandemic the sales team has been distracted with refinances. Focus will return to the purchase market.
Many of our branches are FHA/VA centric – that is the clientele we attract. Prior to COVID the adoption of having customers complete the application remotely was slow. Now consumers are very comfortable with video conferencing and sharing their screen if they need assistance. We see this trend continuing moving forward, however it will not replace the need for validation i.e. am I making the right decision?
As a result the days of making ‘bank’ on a couple of loans will disappear, instead they will be making money on volume. Originators could skate on average skill sets because of the volume over the last 12-months. This dynamic will not be acceptable as the competition becomes fiercer.”
Our national lender spokesperson contributor submitted this reply: “A Sellers market is likely to continue; buyers should have a clear understanding of the pace of sales (how long is an average listing on the market this year vs. last year), so that they are realistic when they find a home (be decisive, know your limits, have a good team ready to act {Realtor, Lender, Attorney}. Questions are coming to us about how quick we can move through the process, can appraisal contingencies be waived, how quick can a Commitment be issued, how quick can we close as these are all parts of the offer / acceptance dance right now.
Interest rates last year were overall on the decline… there was a moment early on in March of 2020 where the capital markets adjusted to a ‘supply concern’ as Investors in mortgage backed securities were grappling with repayment risk as well as forbearance concerns. While forbearance and default concerns were very real, I believe that this year, with the adjusted underwriting guidelines, the supply side is robust but price volatile on the upside. Where last year pricing for a 30 year fixed fell .5% from March to Sept, I believe the opposite will occur this Spring (we have already seen .25% rise…with more likely to come).”
JL’s year end thoughts are, “The end of the year should remain solid with new construction. Lack of inventory could stall things. There will be more refis if inflation doesn’t kick in hard. There’s lots of cash added with government spending. Hang on! It could get very choppy!”
An EVP is seeing many leave the mortgage industry this year due to exhaustion, using their high earnings to ‘live a dream’, or choosing early retirement to enjoy things they had been missing. It also appears that some are choosing to start moving back to the large cities, often to larger places.
Multiple offers, technology needs, refis lessening, new careers, lions and tigers and bears, oh my! Which of you readers has excellent introspection and the accurate crystal ball? What are your thoughts?
As my thoughts always veer towards the humorous, silly, and ridiculous, I am reminded to start the fun part of the blog. Let’s go.
What do you call an overweight kidney doctor who can also predict the weather? A meaty-urologist
Prediction: There will be a minor Baby Boom in 9 months, and then one day in 2033 we will witness the rise of The Quaranteens.
What do you call a psychic who is bad at predicting the future?
Non-prophet.
Here are some BAD predictions made by people I did not interview, courtesy of cracked.com.
And, from the New Yorker, we appreciated:
