It’s like a roller coaster, up and down and all around, and leaves you a little breathless. With the economy getting better, home values are rising in most areas. Good thing, right? But, with fewer homes on the market and buyers still a little uneasy, sales are declining, (Tight Inventory) and with that so are mortgage originations.
The refinance market was good while it lasted, but like the locusts that come every 7 years. It left behind a barren wasteland of potential home sales. Many people refinanced the equity right out of their homes and with the market declines in 2008 and 2009, they are left with homes financed at just about their current resale value, if not above. There is not enough money to realize from the sale of their current home for the down payment on a new one.
Maybe the new 97% LTV loan programs from Fannie and Freddie will help with a lower required down payment, as long as they can afford the new payments. Just need to be sure we don’t overreact and start lending to those who can’t afford what they buy. Unfortunately we’ve done that before, and that wasn’t a good thing.
With fewer loans available, lenders need to be able to quickly identify the loans that may make it and then move them efficiently and compliantly through their system to ensure what they originate will close AND sell. Otherwise, they may spin their wheels chasing non-profitable business which will either cost them in wasted time and money, in processing a poor loan or increased risk for repurchase, or indemnification if closed.
Lenders today need to have an educated origination and underwriting staff, supported by the technology needed to make informed originations, with all required disclosures, and valid underwriting decisions. This all done while monitoring the loans throughout their life cycle to ensure quality, data integrity, compliance and the prompt delivery and purchase once closed. Otherwise a tight housing inventory won’t be the only problem they face.
Lenders now need to work smarter AND harder.