What mortgage lenders predict for 2022
December 13, 2021 1:07 PM
Housing finance companies will be watching all-in-one real-estate players carefully going into 2022 as they continue to gain momentum, according to a recent Arizent survey .
More than half, or 54%, expect one-stop shops, in which residential real-estate buying is centralized with related services included, to be the biggest potential industry disruptor in the next three years, and residential real estate finance companies are in the midst of working out how to position themselves in light of that shift.
The Arizent survey’s mortgage industry respondents came from both nonbanks (29%) and banks (42%) and also included mortgage brokers (15%) mortgage insurance companies (7%), mortgage tech providers (5%) and government and title insurance professionals (2%).
“Some mortgage companies don't have the ability to offer multiple products, but what they will increasingly do is offer multiple ancillary services around their core offering that those companies can use,” said Allen Price, senior vice president at BSI Financial. “It’s matches of that type that we will be seeing in 2022, with the overarching point being a one-stop shop. Everybody's moving to that kind of model.”
Other potential disruptors include all-cash purchase programs (25%) and “iBuyer” companies that make algorithm-based instant offers for real estate online (21%).
However, since the time of the survey,one of the biggest players in iBuying, Zillow, announced its departure from that market due to valuation challenges this year. But some mortgage professionals interviewed for this article said they expect iBuying to rebound in the next year. In light of Zillow’s failure, iBuyers still in the game are likely to make adjustments that address the algorithmic pricing concerns and bring them back in full force in 2022, Price predicted.
“I think they’ll nail this thing and get the valuation piece solved,” he said.
If that comes to pass, the likelihood of real estate companies becoming mortgage-industry business partners could grow in cases where the former don’t have in-house financing units. In upcoming years, they could increasingly serve as referral partners for lenders, and look to servicers to help manage their housing-related cash flows, Price said.
“Exactly how significant it’s going to be in the market remains to be seen, but the iBuyer model definitely is a disruptor and it’s here to stay,” said Price.
The extent of growth that will emerge among real estate innovators next year may depend on how public policy affects the market for, supply of, and financing conditions for low-cost homes.
More than half, or 54%, expect one-stop shops, in which residential real-estate buying is centralized with related services included, to be the biggest potential industry disruptor in the next three years, and residential real estate finance companies are in the midst of working out how to position themselves in light of that shift.
The Arizent survey’s mortgage industry respondents came from both nonbanks (29%) and banks (42%) and also included mortgage brokers (15%) mortgage insurance companies (7%), mortgage tech providers (5%) and government and title insurance professionals (2%).
“Some mortgage companies don't have the ability to offer multiple products, but what they will increasingly do is offer multiple ancillary services around their core offering that those companies can use,” said Allen Price, senior vice president at BSI Financial. “It’s matches of that type that we will be seeing in 2022, with the overarching point being a one-stop shop. Everybody's moving to that kind of model.”
Other potential disruptors include all-cash purchase programs (25%) and “iBuyer” companies that make algorithm-based instant offers for real estate online (21%).
However, since the time of the survey,
“I think they’ll nail this thing and get the valuation piece solved,” he said.
If that comes to pass, the likelihood of real estate companies becoming mortgage-industry business partners could grow in cases where the former don’t have in-house financing units. In upcoming years, they could increasingly serve as referral partners for lenders, and look to servicers to help manage their housing-related cash flows, Price said.
“Exactly how significant it’s going to be in the market remains to be seen, but the iBuyer model definitely is a disruptor and it’s here to stay,” said Price.
The extent of growth that will emerge among real estate innovators next year may depend on how public policy affects the market for, supply of, and financing conditions for low-cost homes.
Policy predictions
Affordable housing topped the list of legislative priorities that survey respondents felt were most important mortgage professionals, at 37%. That was followed by government-sponsored enterprise reform (30%), fair lending (14%), revisions to the qualified mortgage definition within the ability-to-repay rule (13%) and an increasing number of states moving to apply the Community Redevelopment Act to nonbanks (6%). All of these combine to address hurdles would-be homeowners face, ranging from soaring home prices and housing inequities to the ability to use non-traditional sources of income or payment histories to obtain financing.
“If we can create a political situation where more people can afford a home and we can have a very healthy inventory, then the main issue would be for underserved segments of the population to have a more flexible way of looking at credit and a more lenient way of looking at the ability to repay without getting anyone into trouble and creating another subprime crisis,” said Miguel Vega, an executive vice president who oversees multicultural business development at First Community Mortgage.
Lenders are likely to consider public policy affordable housing important because, between the fading refinancing boom and the growing diversity of younger, entry-level homeowners, they could help to increase and expand customer relationships.
“We have an important population of first-time homebuyers right now who are difficult to reach,” said Vega, noting that Filipino, African-American and Latino households all have become significant or fast-growing customer groups in the areas his company serves.
While affordable housing policy at the GSEs get singled out as the most important to the broader market next year given Fannie Mae and Freddie Mac outsized presence, for first-time buyers who increasingly come from communities like these it’s public and private policies arounddiverse hiring and Federal Housing Administration-insured financing that may turn out to be more crucial.
That may be why more than half of mortgage professionals (56%) ranked FHA underwriters as likely to be the second largest back-office recruiting challenge next year. Only processors (63%) are likely to be more difficult to recruit, according to the survey. Half of all lenders expect to face challenges recruiting underwriters for mortgages sold to the GSEs and non-QM loans.
“If we can create a political situation where more people can afford a home and we can have a very healthy inventory, then the main issue would be for underserved segments of the population to have a more flexible way of looking at credit and a more lenient way of looking at the ability to repay without getting anyone into trouble and creating another subprime crisis,” said Miguel Vega, an executive vice president who oversees multicultural business development at First Community Mortgage.
Lenders are likely to consider public policy affordable housing important because, between the fading refinancing boom and the growing diversity of younger, entry-level homeowners, they could help to increase and expand customer relationships.
“We have an important population of first-time homebuyers right now who are difficult to reach,” said Vega, noting that Filipino, African-American and Latino households all have become significant or fast-growing customer groups in the areas his company serves.
While affordable housing policy at the GSEs get singled out as the most important to the broader market next year given Fannie Mae and Freddie Mac outsized presence, for first-time buyers who increasingly come from communities like these it’s public and private policies around
That may be why more than half of mortgage professionals (56%) ranked FHA underwriters as likely to be the second largest back-office recruiting challenge next year. Only processors (63%) are likely to be more difficult to recruit, according to the survey. Half of all lenders expect to face challenges recruiting underwriters for mortgages sold to the GSEs and non-QM loans.
Foreclosure forecast
Mortgage professionals generally expect more foreclosures in 2022. Half of survey respondents expect the pace in “some or all areas” to be back to normal by year-end, depending on what state or local rules allow.
“We think next year, assuming the Delta variant isn’t an issue, and the booster works, the industry will move back to what is a more normal foreclosure environment, for the most part,” Price said. “There will be jurisdictional exceptions, but on an overarching basis we expect to go back to more what it looked like in the pre-pandemic environment.”
Nearly one-third of respondents think foreclosures will “definitely” get back to normal in some areas, but another 30% predict — as Price does — that will only happen if new pandemic-related concerns don’t emerge. Almost 20% are confident of a return to normalcy across the board, but 14% think that’s “unlikely.” Another 6% think foreclosures “definitely won’t” return to normal.
The varying predictions related to whether foreclosures will get back on track in 2022 may depend a lot on what respondents consider “normal” given the mandates introduced for servicers since the onset of the pandemic. Many of these are aimed at providing expanded access to alternatives for troubled borrowers, in the hopes of limiting foreclosures.
“We don’t anticipate seeing a normalization of foreclosures similar to the pre-pandemic levels in 2022, and it’s important to understand that the industry has been heavily preparing for this moment,” said Jay Jones, executive vice president of servicing at Mr. Cooper Group, in an email. “Servicers need to ensure seamless communication with borrowers, so they can exit forbearance plans and do everything possible to avoid foreclosure.”
However, relative to the level of foreclosure activity during the pandemic, servicers do generally expect more distressed mortgage activity, whether through foreclosure or other alternative home dispositions. That could create a slightly larger market for distressed homes, freeing up some inventory and potentially creating more of an incentive for innovators like iBuyers to get involved in real estate markets.
One source of distressed homes attractive to investors and potentially affordable-housing groups could come from nonperforming loan sales that will likely ramp up in 2022 as mortgages in the GSEs’ portfolios leave forbearance. Fannie and Freddie typically reserve smaller pools of these loans for a more limited nonprofit or community buyers who aim to use them to help house consumers in need.
“We expect to see some fairly decent-sized GSE portfolios come to market. They’re going to be bigger than some of the ones we saw in 2021. Investors are building up cash because they know that in Q1 or Q2 they expect to see volume come to market from the GSE,” Price said. “A small number of nonprofits active in the space also are lining up capital from institutional buyers so they can be ready to bid on the portion of pools allocated to borrower-centric organizations.”
“We think next year, assuming the Delta variant isn’t an issue, and the booster works, the industry will move back to what is a more normal foreclosure environment, for the most part,” Price said. “There will be jurisdictional exceptions, but on an overarching basis we expect to go back to more what it looked like in the pre-pandemic environment.”
Nearly one-third of respondents think foreclosures will “definitely” get back to normal in some areas, but another 30% predict — as Price does — that will only happen if new pandemic-related concerns don’t emerge. Almost 20% are confident of a return to normalcy across the board, but 14% think that’s “unlikely.” Another 6% think foreclosures “definitely won’t” return to normal.
The varying predictions related to whether foreclosures will get back on track in 2022 may depend a lot on what respondents consider “normal” given the mandates introduced for servicers since the onset of the pandemic. Many of these are aimed at providing expanded access to alternatives for troubled borrowers, in the hopes of limiting foreclosures.
“We don’t anticipate seeing a normalization of foreclosures similar to the pre-pandemic levels in 2022, and it’s important to understand that the industry has been heavily preparing for this moment,” said Jay Jones, executive vice president of servicing at Mr. Cooper Group, in an email. “Servicers need to ensure seamless communication with borrowers, so they can exit forbearance plans and do everything possible to avoid foreclosure.”
However, relative to the level of foreclosure activity during the pandemic, servicers do generally expect more distressed mortgage activity, whether through foreclosure or other alternative home dispositions. That could create a slightly larger market for distressed homes, freeing up some inventory and potentially creating more of an incentive for innovators like iBuyers to get involved in real estate markets.
One source of distressed homes attractive to investors and potentially affordable-housing groups could come from nonperforming loan sales that will likely ramp up in 2022 as mortgages in the GSEs’ portfolios leave forbearance. Fannie and Freddie typically reserve smaller pools of these loans for a more limited nonprofit or community buyers who aim to use them to help house consumers in need.
“We expect to see some fairly decent-sized GSE portfolios come to market. They’re going to be bigger than some of the ones we saw in 2021. Investors are building up cash because they know that in Q1 or Q2 they expect to see volume come to market from the GSE,” Price said. “A small number of nonprofits active in the space also are lining up capital from institutional buyers so they can be ready to bid on the portion of pools allocated to borrower-centric organizations.”
