This year's MBA Annual Convention '23 started with a bang while MBA leaders urged attendees to contact their legislatures as they work through new mortgage regulations. While the tone when describing the current state of the mortgage market was grim, there was a renewed focus on expanding the borrow pool by focusing on populations historically underserved in home lending. Here's our top 5 takeaways from this year's event:
This phrase acted as a rallying point of hope for mortgage lenders across the industry. While 2023 has been a tough year—high interest rates, low housing inventory, and astronomical home prices—the rate of increase is expected to slow through 2024 and level out back to somewhat normal in 2025. A better mortgage horizon is in sight.
The Fed is committed to deaccelerating inflation, but stability is what is needed most right now to counteract the uncertainty. Rates may stay higher longer than lenders or borrowers would like, but that will prevent the destabilizing cycle of constant increases. That focus on stability was also highlighted in conversation with the Director of the CFPB, who credited the MBA for being realistic in their remarks to the Supreme Court; the clarity and direction the CFPB’s leadership provides is essential for the mortgage industry to operate smoothly, and dismantling those structures entirely would be harmful to lenders and homeowners both. However, it remains to be seen how disruptive BASEL 3—which is intended to minimize the potential for non-banks to cause interruptions to financial services—may prove to the mortgage industry in its final form.
With originations hitting such a low after a historic high, mortgage lenders need to strategize how to reach different segments of the population who are newly eligible for homeownership. New data sources like positive renter history, student loan repayments, and other indicators of reliability plus the new FICO 10T and Vantage Score 3.0 have opened the door to thousands of renters who may be ready to take that next step. Mortgage lenders who are open to considering small loan balances and first-time homebuyers who can take advantage of down payment assistance will be able to capitalize on the potential revenue streams of these underserved communities.
The best way to get through the next couple of years will be to focus on where your strengths are, be creative in how you can expand those capabilities to untapped markets, and rethink pieces that you may have undervalued before. At the same time, you need a team and infrastructure that can transition efficiently to a new plan if things don’t stabilize as quickly as you’d like. The best way to combine both approaches is to stay diligent in your forecasting, stress test every possible model and variable, and maintain consistency wherever it is in your control. Take advantage of more efficient automated technology throughout your workflows with necessary safeguards in place to prevent unintentional bias,
Mortgage lenders have the opportunity to drive connection between the different spokes of the homebuying ecosystem. Referral partnerships are an excellent way to harness a larger web of relationships: keeping realtors, homebuilders, and state or local financing institutions in the loop on your latest products so they can align their messaging with yours can help lay the groundwork for smooth referrals in both directions. Technology is already being developed to help connect first-time homebuyers with the right down payment assistance programs, like Freddie Mac’s new DPA One resource. Taking advantage of these tools or finding similar ways to create more value for other stakeholders can open up new, unexplored areas of growth.