Despite some concerns about rising interest rates, global uncertainty and compliance issues, most lenders remain optimistic about the mortgage outlook in 2016.
According to a recent survey of 200 mortgage lending professionals conducted by Lenders One, approximately 62% of respondents expect mortgage purchase production to increase and 87% anticipate moderate to robust activity in the mortgage purchase market. Overall, respondents predicted a move toward industry growth and a sellers’ market, despite potential interest rate increases and continued regulatory compliance challenges.
This optimistic view is bolstered by comments from Sam Rosenblatt, mortgage planner at Academy Mortgage Corporation, with headquarters in Salt Lake City. He described the business environment for spring 2016 “off to a great start,” with “houses selling at or above listing price in many locations throughout the country.”
“Our phones are ringing with potential buyers who want to prequalify and get a loan before the home so they won’t miss out on dream home opportunities,” Rosenblatt said in an email. “These buyers include many first-time homebuyers and millennials, which defies concerns that this group would be a slow target market this year. Refinance business is strong too.”
The Lenders One survey found that 79% of mortgage lenders believed the millennial market is one that will see growth this year. Other groups viewed by mortgage professionals as having the best growth potential are Hispanics (71%), nontraditional buyers in the rental and vacation home markets (70%) and boomerang buyers, people who now qualify for a loan after undergoing a short sale, foreclosure or bankruptcy (68%), according to the survey.
Mortgage lenders also recognize that challenges exist in the coming months that could impact the home-buying market. Rosenblatt said he expects the industry to stay on a positive course for the remainder of the year, but “we will have to see what impact the U.S. presidential election and global uncertainties will have on interest rates, consumer confidence and home buying as we move into next year.”
The concern over interest rates also is reflected by survey respondents as 68% indicated that rising interest rates in 2016 could have a big impact on business. Robert Wolf, vice president of Capital Markets at Lenders One Cooperative, said many mortgage lenders are “waiting for the other shoe to drop” regarding possible increases in interest rates. If the Federal Reserve raises rates later this year, Wolf said the refinance market may go down, or some businesses may look for loans that are not entirely in their comfort zone or may need to sell other products.
Respondents to the Lenders One survey identified two essential elements necessary for mortgage lenders to stay competitive in 2016: Improved customer service (77%) and decreased closing times (71%). “There is a general feeling that we need shorter term times,” Wolf said. “Time is money. Turn times are key, and especially when dealing with money borrowed from warehouse banks.”
One new challenge that has affected closing times this year has come from the recent implementation of the new TILA-RESPA Integrated Disclosure or TRID rule. According to the survey, 73% of respondents expected 2016 to be impacted by compliance with regulations. TRID intially led to longer turn times and extended closing times. “Along with the logistics of adapting to the new technology and processes, new tasks and more regulatory burden were being placed on loan originators,” Wolf said. “The end result of this is that it took more time.”
Most of these extended closing times occurred in early 2016, and Wolf said those times improved in March and April. With originators picking up the pace and the whole process getting better with new technology, he believes many of the technical and compliance challenges with TRID will get resolved over time.
Staff writer Carole Jakucs contributed to the writing and research of this article.