0
0
With a shift in the mortgage market from refinances to purchase loans, what are the main concerns of most mortgage lenders? The main area over the past few years, when rates were low, was the increasing regulations that hampered lending and definitely increased costs. Not so anymore, according to a recent Moody’s Investors Service survey
In 2017, Regulatory concerns have dropped among lenders. Not surprisingly taking its place as the lender’s number one concern is the rise in interest rates.
Lenders have learned to cope with the new regulations, but increased rates pose a whole new set of challenges.
What are lender’s key concerns in 2017?
- 40%: Rates
- 29%: Economic Conditions
- 12%: Change in demand
- 6%: Regulatory
- 4%: Funding availability (Warehouse lines)
- 3%: Demographics
It’s understandable that lenders are concerned with rising rates and the effects they have on the housing and mortgage markets.
However, it seems a little strange to me that lenders are not concerned with housing availability and affordability. These are major factors that will dictate home prices, having a major impact on what consumers can and will buy in 2017 and beyond.
For now, non-bank lenders still have a slight advantage, if you want to call it that, in the first time homebuyer and low to moderate income borrower markets. This is because they are willing to take the risks of FHA lending and the use of other low down payment programs.
Most Banks are still sitting on sidelines fearful of the additional risks accompanying such programs. The question is…for how long?
- With rates rising and loan volumes down, will more banks enter the FHA and low down market?
- How about non-QM and Alt-A lending?
- Will we see a re-emergence of such products to help get more buyers qualified?
It may be time to once again expand the credit box and explore more options and opportunities for new products. This obviously comes with additional risks, but that’s what lending is about; managing the risk. This can best be done by originating quality loans, regardless of the product involved.
Bank and non-bank lenders can minimize their risk by carefully originating and closing loans with an eye toward quality and compliance. Expanding the credit box also expands the audit box.
Review more pre and post-closing loans originated in the riskier categories. Ensure loans are being done correctly and quickly identify any shortcomings that could cause problems.
Once identified, incorporate the changes and training to protect against any reoccurrence. Early detection allows for early correction.
No doubt things are going to get tight in 2017 as rates rise further. Be prepared with the products needed to compete and sleep soundly knowing you have the risk bases covered.
There’s no substitute for quality or for a good night’s sleep.
Sleep soundly, my friends…
