Year in Review: The biggest mortgage industry themes of 2021

As the country recovered from the economic effects of the coronavirus pandemic, each new month or quarter seemed to bring a report of a new record broken — most notably in home prices, annual appreciation and overall inflation. Not only did housing costs and purchase demand skyrocket to new highs, the industry also witnessed records broken among cash-out refinances, bidding wars, home equity, interest rates and all-cash offers.

Record home prices received the lion’s share of attention, and while the upswing in property values was good news for sellers and homeowners, it spelled trouble for buyers, particularly those looking for starter homes. The downturn in affordability left many hopeful buyers on the outside looking in, and has turned into a situation that actively needs to be addressed in the coming year, said Jeff Taylor, managing partner at mortgage processor and risk compliance consulting firm MPhasis Digital Risk and a chairman of the Mortgage Bankers Association Political Action Committee.

“If you're looking at people needing affordable housing and getting their start as a home buyer, their salaries may increase 3% annually, and the bottom of home price appreciation is 5%,” Taylor said. “That's just an issue we're still trying to solve.”

With mortgage originations finishing 2020 strongly amid a global pandemic, many in the mortgage industry braced themselves for a largely anticipated slowdown in 2021. But among some lenders, it didn’t happen.

“We're just continually shocked and surprised that trends that started in ’20 lasted all through ‘21,” said Brian Koss, executive vice president at Mortgage Network, which has offices throughout the East Coast. While the pace has become “less frantic,” interest among home buyers from across age demographics has continued, with multiple generations sometimes bidding on the same house.

“We had really come in at the beginning of the year believing in a lot of the forecasts that we were going to hit some big headwinds,” echoed Paul Buege, president and chief operating officer of Inlanta Mortgage, the majority of whose business is concentrated in the Midwest and south-central U.S.

“We just didn't know how bad the storm was going to be by summer, early fall for us. It was a great surprise that what we found out was that the market was very, very strong. We set some new historical records this year.”

While the year began with promising news of a vaccine rollout, limited uptake and the emergence of two new variants meant COVID-19 still played a huge factor in industry decision-making. One lender began offering discounts on closing costs to borrowers with proof of vaccination. In the latter weeks of the year, lenders pondered over the impact of the omicron variant on the direction rates. In the summer, the delta variant forced banks to revisit their return-to-work plans, while Rocket Mortgage instituted a testing requirement for its unvaccinated staff.

But just as COVID brought about the quick adoption of new work-from-home policies in 2020 with many employers, further guidance this past year has also removed some of the uncertainty among their staff, who can now make choices regarding possible relocation, benefiting lenders.

“More businesses are saying you may not have to go back to work indefinitely, or it will be a hybrid situation, and therefore, that kind of clarity has really helped people making that decision,” Koss said.

To Koss’s surprise, it has not been a one-way exodus from the North toward sunnier, Southern climes either, as some predicted. “They may have left the city and gone farther out,” he said. “But it's still surprisingly well balanced.”