How mortgage lenders are tackling a new spring season
Two years of pandemic borrowing is continually reshaping the way lenders do business.
Product originators a record $4.4 trillion in volume last year, reaching an all-time high in purchase loans and a 17-year high in cash refinances. But today, the mortgage industry is facing headwinds on many fronts, including rising mortgage rates and seemingly unstoppable home price growth with a current average of nearly $364,000 nationwide, according to Redfin. Residential construction loans are on the rise but the pipeline still has a long way to go to reduce supply.
As they head into spring, mortgage lenders, brokers and experts predict a busy and competitive landscape, but say no more non-QM loans fill volume gaps caused by low supply. Borrowers won’t forgo peak home buying season and the industry will continue to embrace electronic fences in a bid to ease the transaction process, experts said.
The traditional rhythms of the year change. As competition for limited homes has intensified over the past two years, some lenders have noticed signs that the usual springtime spike in home purchases may smooth out for the rest of the year.
“We saw peaks in the spring and summer, but it actually picked up in December for some reason,” said Dan Daduon, executive vice president of sales at Atlanta-based Silverton Mortgage. “The ability to buy a home online now has absolutely made a bigger push anytime of the year, compared to waiting when it’s warmer.”
Morty, a New York-based online mortgage lender, saw signs of consistent volume over the winter months even before the pandemic, Vice President of Mortgages Rob Heck said. He, too, attributed the volume to increased accessibility to online loans, but acknowledged, along with Daduon and other experts, that traditional constraints will keep the spring season healthy.
“New construction is still a big chunk of the market and a snowy, snowy winter is going to impact that,” Heck said. “School is still at this stage, sort of the same schedule. And so people will still try to buy and sell their homes during the school year.
Borrowers are emerging from the pandemic in different financial situations than they entered it, and lenders are responding to their needs with new, broader non-QM offerings. Homebuyers looking for increasingly expensive homes pushed jumbo loan volume at a high of 17 years and securitization issuances last year were the highest since 2017. The trend prompted more lenders like United Wholesale Mortgage, Homebridge and Tomo to add jumbo products This year.
Mortgage companies large and small have also introduced bank statement loans, an option for borrowers who may be emerging from the pandemic and “big quit” self-employed people. The United Wholesale Mortgage product has a limit of up to $3 million, and borrowers can have up to 90% LTV with no mortgage insurance required. Mortgage fintech Wemlo also added a bank statement product as well as a DSCR loan for investors, and Plaza Home Mortgage also announced its own Investor Solutions DSCR loan.
“More people are self-employed or doing their own work if they don’t have a tax return. So we’re using those types of non-QMs as a gap,” said Sean Cahan, president of Cornerstone First Mortgage, who expects his business’ non-QM volume to increase this year. “If you don’t have these products, it could be a business killer. Buyers are really trying for an easier way to do business.
Part of this simpler way of doing business includes further digitization of the borrowing process. Desktop ratings are now an integral part of Fannie Mae and Freddie Mac subscription systems, starting this month. MISMO is about to launch its e-Eligibility Exchange, powered by SnapDocs, which will allow the industry to have a centralized database of electronic fence information.
Remote online notarizations are set to become the next ubiquitous mortgage tool after also gaining traction since the start of the pandemic, experts have said. Lenders such as Rocket Mortgage claim to be able to perform electronic fences in all 50 states, but some states, such as California, still require “wet signatures” in hybrid fences and did not authorize RON. Lenders like Cahan at San Diego-based Cornerstone say they aren’t as optimistic about technology, but are still developing technology before any changes.
Last year, ten states made RON shutdowns permanent, and New York Governor Kathy Hochul signed her state’s RON shutdown law last month. The companies continue to announce new partnerships with local lenders and the first-ever RON closings in states like New Hampshire, and MISMO in February had certified 20 such platforms, according to MISMO President Seth Appleton.
“It’s a big piece that I’d like to see cleared up, worked on, and adopted more quickly,” Duduon said. “That’s where the puck goes. The sooner we can get there, that would be a big market shift and a benefit. »