Mortgage Industry Trends

Fate of Housing: Another Point of View

Mortgage-rates
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Mortgage-ratesIf you’ve been following my blog lately (and I sure hope you are), then you know I’ve mentioned on more than one occasion the outlook for housing, and how that relates to lending. Here’s another one.

Recently, Mark Fleming, the chief economist for First American, commented that he believes a slight interest rate hike by the Fed would not have any major negative impact on (Rate Hike). One more opinion… This one because a rate hike would be the result of a stabilizing economy with an improving labor market and that is beneficial to the housing market. Do you agree?

A recent Fannie Mae study revealed that many consumers believe that now is not a good time to buy because consumers are concerned about their future. However, just prior to that report, the MBA increased their forecasts for mortgage originations in 2016 because of a rosier outlook for home sales. Who’s on first?

I’m not sure if a rate hike will help or hurt. That remains to be seen if, and when, it takes place. Just the talk of an impending rate hike seems to have the effect of a brief continuation of refinancing. Some consumers want to take advantage of the lower rates and Realtors are telling potential buyers that the time to pull the trigger is now, before the rates go up. Could the Fed be “jawboning” the market? If so, does that do anything to improve the labor market? I dunno, who’s on first?

The fact remains that rate hike or not – people will continue to buy and sell homes. People need to live somewhere. The equal and opposite reaction of people not buying is a rise in those renting.

Using the rules of supply and demand, the more people that rent, the higher the rents. The higher the rent, the more affordable it becomes to own a home. So, people will buy. When people are willing to buy, there are those willing to sell. Obla Dee, Obla Da, life goes on…

Lenders can’t control rates or rents. But, they can do a little something about the cost of homeownership. They can also help educate consumers on the benefits of owning a home and how they may qualify to do so in any rate environment.

To do this, lenders need to be prepared to meet the needs of prospective home buyers through ease of access to loan pre-qualifications and education material clearly outlining and explaining their financing options. It amazes me to learn that many consumers, especially the Millennials, still believe they need a large down payment, with perfect credit, to buy a home. Lenders need to get the word out otherwise.

I can confidently predict that rates will go up, go down, or stay the same. In each case, people will buy, sell and rent. Lenders will do what they do best, lend. To do so profitably they need to be sized right, with the flexibility to service the needs of a myriad of home buyers, have specific products and the expertise to offer niche type products to select consumers.

Each lender must decide their business model and prepare accordingly. I believe success will depend on training, teamwork, technology, and careful expense management. Each person in the organization must understand the mission and properly execute the company plan. To borrow a slogan, “Quality is job 1.”

Do you think that now is a good time for a rate hike?

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Rates will rise sooner or later. What changes might be needed in your business model when they do? Are you preparing to do so? Don’t be stuck wondering who’s on first?

Michael Vitali

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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Michael Vitali

About Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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