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In a recent article published in the Scotsman Guide, I predicted that last year would be the biggest year for mortgage consolidations since 1994. The prediction was correct but, for different reasons.
While I expected a significant increase in the range of interest rates, the loss to the mortgage industry was caused by somewhat higher interest rates resulting in squeezed margins. This was due to an overall reduction in production, particularly refinances. The reduction in refi’s created intense competition for retail MLOs, which drove commissions up.
Based on my assumptions regarding the actual market size and the injection of “nonfinancial” institutions, the inevitable pressures started to squeeze margins even more. Sometimes those tighter margins even ended up with losses on every loan with some lenders shutting their doors.
I think that consolidation is going to be significant though 2021. There is also talk of a recession in 2020 or 2021, which adds more pressure on “nonfinancials” with thin capital and cash.
Click here if you would like to read the entire article based on my conversation about this prediction published in the Scotsman Guide.
