Rapidly rising interest rates devastated the origination market and
On the servicing side, even though rising home values provide a level of protection against foreclosures for distressed properties, a
Also, the mortgage business has not been immune to issues around
Here is a recap of some major events in the past 12 months that lenders should keep in mind for their 2023 business plans:
FHA could finally cut its premiums
Finally at the Mortgage Bankers Association's annual convention in October, Federal Housing Commissioner Julia Gordon raised the issue, but said a reduction was not coming up anytime soon, which she reiterated when the Mutual Mortgage Insurance Fund reported a very healthy 11.11% capital ratio.
Gordon said any action would not occur until the 2023 federal budget was in place. That process is still underway and thus a decision is not likely until after the New Year starts.
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More consolidation, more layoffs
And more is likely on the horizon. During the MBA, Marina Walsh, one of its economists, stated that an
Meanwhile, several non-qualified mortgage and reverse mortgage lenders have shut their doors, while some others have
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More distressed borrowers
And with falling home values, it is likely the share will continue to grow, and mortgage servicers will have to deal with the fallout.
The good news, so to speak, is that a quartet of solutions introduced to deal with high rates of missed payments are likely to remain part of the distressed borrower waterfall, some discussed at the MBA's annual servicing conference last February.
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A recession officially arrives
Duncan's final outlook for 2022 called for $2.35 trillion in origination volume; that was approximately $1 trillion less than the projection he made in December 2021.
Consumers have a different outlook. More than four in 10 in a LendingTree survey said the country will have a recession in the next year and 75% of those declared the yet-to-occur downturn will be worse than the Great Recession.
LendingTree's own economist, Jacob Channel doesn't see a major crash happening in 2023 — at the moment.
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Changes to do with credit scores reshape costs
Furthermore, mortgage lenders will now be allowed to pull data from two of the three bureaus rather than all of them, Thompson announced at the same time.
Then in November, FICO unveiled a controversial tiered pricing plan. A small group of 46 heavy users will get an inflation-related increase of less than 10%. The six lenders in the second tier will get a 200% boost, while everyone else gets a 400% increase.
FICO's argument is that until now it had been charging approximately 60 cents per credit score across the board and even the largest boost would not be significant for lenders.
"With this royalty increase, FICO will now collect approximately 60 cents to approximately $2.75 per FICO Score," the FICO statement said. "That means FICO will collect approximately $2-to-$8 total for all three scores out of a $40 to $50 (or more) tri-merge report and score bundle, and out of an average $3,800 in closing costs."
But the lending community is concerned about preferential treatment along with increased costs to borrowers.
How these changes will impact mortgage lending in 2023 will bear watching.
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Data breaches and wire fraud continue to increase
Title fraud risk was present in almost half of the third quarter transactions that were processed through FundingShield. In general business email compromise — while not entirely real estate related — has been on the rise. In 2021, the most recent data available, the Internet Crime Complaint Center received 19,954 business email compromise and related email account compromise complaints with adjusted losses of nearly $2.4 billion.
At the same time, several mortgage servicers are being sued because their systems have been breached and personally identifiable information was taken.
The trend to watch in 2023 is how much these frauds are likely to increase, because with mortgage transactions, as Willie Sutton allegedly said about robbing banks, "that's where the money is."
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