Just when improving economic conditions, better savings, and lower mortgage rates was turning the housing market around, the emergence of Covid 19’s Omicron variant, on the throes of a New Year, has cast a cloud on the possibility of a complete turnaround. The mortgage trends for the New Year will largely be determined by the US government’s ability to contain the spread of this variant. In this blog we take a look at how things might emerge in the mortgage market in 2022:
Mortgage Market Trend#1- A Rise in Foreclosures
The end of the forbearance periods led by the CARES Act will see a jump in the rate of foreclosures. Lending institutions will cooperate with borrowers to save them from being a loan defaulter.
For instance, Wells Fargo will reach out to homeowners who are nearing an end of their loan payment moratorium. Lenders are expected to conduct foreclosure auction on abandoned property first. They will also work with the borrowers to carve a payment plan with adjusted loan terms.
Realtor.com’s 2022 Housing Forecast states a 6.6% growth in home sales in 2022.
Mortgage Market Trend#2- Mortgage Loan Interest Rates
Factors such as the Federal Government’s decision to hold off purchasing mortgage-backed securities and long-term treasuries and high inflation will increase mortgage loan interest rates in 2022.
In 2021, factors like increasing demand from millennial buyers, the desire to get more space, and a favorable mortgage rate have been driving home sales. But the expected increase in mortgage rates will demotivate buyers from investing in a house thereby hurting the profit prospects of a mortgage lender.
However, according to experts, the fear of rising home loan prices because of high interest rates will propel a high consumer demand for houses.
Freddie Mac states that the mortgage rates will inflate at a rate of 3.7% in 2022.
Mortgage Market Trend#3- RefiNow’s Eligibility Expansion to Drive Mortgage Refinance Volume
The Federal Housing Finance Agency (FHFA) had expanded borrowers’ eligibility criteria for Fannie Mae’s RefiNow and Freddie Mac’s RefiPossible programs. Earlier, borrowers with an area median income (AMI) at or lesser than 80% were eligible for these programs. FHFA’s recent announcement extends this limit to 100%. Under these programs, lenders will have to give a USD 500 credit to borrowers if an appraisal is required to value their house. Borrowers’ income has to be verified through pay stubs and one year of personal tax returns.
These programs are expected to propel refinance mortgages as these guarantees a 0.5% reduction in the mortgage interest rate.
Mortgage Market Trend#4- Rise in Housing Prices
Lack of house inventory against a high demand from millennial buyers will fuel housing prices in 2022. The work from home situation since the inception of the pandemic has motivated people to shift from high-cost cities to the suburbs. This is expected to make single family houses more costly in the smaller markets than high-cost areas such as the California Bay area.
In addition, regions mulling another lockdown because of the emergence of the new Covid 19 variant, will restrict construction work. Mobility restrictions will create supply chain issues such as lack of raw materials needed to construct a house. This will further propel prices of houses.
Freddie Mac expects house price increase at a rate of 7% in 2022.
Mortgage Market Trend#5- Technology to Drive Realtor and Lender Relationships for Referrals
Partnerships with realtors have often been the go-to strategy for mortgage lenders to get insights into the demography of purchase-ready buyers. However, in many instances, realtors achieve multiple leads using the partnership investment but never really share the same with lenders.
The year 2022 will see the advent the advent of technologies that will centralize lead management and the realtor and lender partnership. This technology will involve obtaining and storing a copy of the realtor’s paid invoice in the cloud. The document can be easily accessed by CFPB and agencies alike to audit the lenders and realtor’s co-marketing efforts.
Lenders are also expected to use market intelligence tools to find high quality realtors for a beneficial partnership for referrals.
How Can We Help You Deal with Mortgage Market Challenges in 2022?
While the above trends will pose new challenge to lenders, coping with them will put them to real test. For instance, FHFA has recently announced the permanence of desktop appraisals effective from 2022. This can render the job of appraisers even more tough. They have to gather and sift through multiple data points to provide an accurate value for a house. Likewise, dealing with shortage of skilled staff and cutting through operational costs will continue to remain big challenges
We have wide experience in appraisal form filling, report generation and appraisal review services and can leverage it to assist you meet the new mandate. Our experts will assist you to look into the technical and logical aspect of a report and assist your appraisers come to a logical conclusion. Our support services will also assist you put together and check if the appraisal documents meet regulatory guidelines along with Uniform Standards of Professional Appraisal Practice (USPAP) guidelines. In the process your team of desktop appraisers will have an extended team to rely upon for all back-office support requirements and meet scalability needs in the face of rising loan volumes.
In the last two pandemic hit years, our proprietary mortgage automation tool MSuite has assisted our clients reduce reliance on manual intervention for resource intensive work like data indexing and extraction. This has helped them reduce loan onboarding time by 70%, increase loan accuracy to 99%, and eliminate manual processes. The cumulative benefit of this has been 50% reductions in costs.
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This article is brought to you by ExpertMortgageAssistance, a pioneer in mortgage back-office support services. We have over 10 years of experience in supporting the requirements of blue-chip financial institutions for mortgage processing, underwriting, appraisal, closing, post-closing and title services. Today we serve over 200 financial institutions, including two of USA’s top-tier mortgage lenders.
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