Mortgage Matters: Where Is The Mortgage Industry Headed In 2018?

August 20, 2018

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The Outlook also anticipates that the Fed will continue raising rates in order to combat inflation. Under these conditions, Freddie Mac anticipates that total home sales will…
By, Brian Barker

Effective marketing and loan fulfillment programs, coupled with a laser-sharp focus on customer service will drive the mortgage industry to generate solid revenue and profit in a tough year according to a white paper titled “Efficient Collateral Valuation Key to Success in 2018,” published by Veros Real Estate Solutions (Veros) recently.

The paper also outlines the important opportunities for mortgage lenders working to be more competitive in a purchase money market and how they can position them-selves well for securing additional business when loan volume levels increase in the future.

According to the study, “by focusing their efforts on the right products, [lenders] will also have the opportunity to build stronger relationships with existing bank customers and credit union members.” Outlining three keys to success in a tough year, the study said that excellent customer service, good marketing, and efficient operations to ensure good customer experience while reducing costs and increasing profitability would be important for lenders in 2018.

“This paper offers lenders a real opportunity during a year that both the MBA and Fannie Mae predict mortgage loan origination’s will be down, making competition more in-tense,” said David Rasmussen, SVP, Operations at Veros.

Freddie Mac Forecasts Housing Conditions Through 2019

Freddie Mac has released its latest Outlook, breaking down the state of the housing market in April 2018 and examining where things are likely to head over the next few years. The Outlook forecasts continual gradual growth through Q4 2019, so long as construction continues to ramp up to help offset current constraints on available housing inventory.

Freddie Mac’s Outlook predicts that mortgage rates will wind up averaging 4.9 percent in Q4 2018 and 5.4 percent in Q4 2019, respectively. Freddie’s Outlook bases these predictions on the assumption that housing supply will continue to increase, whereas demand will cool slightly as mortgage rates rise. The Outlook also anticipates that the Fed will continue raising rates in order to combat inflation. Under these conditions, Freddie Mac anticipates that total home sales will increase from 6.12 million in 2017 to 6.3 million in 2018.

For 2019, Freddie predicts total home sales to hit 6.44 million.

Towards the end of 2017, the paper indicated, lenders began to gear up to attract more purchase money trans-actions, but “now four months into the new year, competition for this business has heated up significantly.”

Adding pressure on smaller institutions that wanted to compete for business, were the deep pockets of the bigger lenders who were investing a great deal of their marketing budget into television and radio ads, the paper said.

Home equity products were another great opportunity for both, borrowers and lenders the paper indicated. Despite the new tax law that reduced the overall amount of interest borrowers could write off depending upon the number of qualified residential mortgage loans they carried, the paper said that for the vast majority of home equity borrowers, the loans still made excellent sense.

Making home equity loans more attractive for borrowers was the fact that as interest rates continue to rise, cash out refi lending would become unsustainable. Home equity loans, therefore, would provide lenders with the opportunity for effective marketing and efficient processes to stay ahead of the competition.

“New home sales will drive the growth,” the Freddie Mac Outlook states. “The existing home sales market will likely remain flat under our baseline forecast. For existing home sales, the effect of stronger income growth and other demand-side factors will be roughly balanced by rising rates. New homes sales will drive growth as housing construction keeps grinding higher.”

However, Freddie predicts that, while housing construction will continue increasing, it is unlikely to see much acceleration during those two years. “The existing home sales market has little room for growth with inventories so constrained,” the Outlook states. “Our baseline forecast has only modest increases in mortgage rates. As our historical analysis showed, rapid increases in rates typically dampen housing market activity significantly.”

If rates for the 30-year fixed-rate mortgage increase above 5.5 percent, Freddie Mac’s Outlook predicts a decrease in home sales of around 10 percent relative to their baseline.

Source: DSNews