Mortgage lenders remain optimistic and unbothered by the news surrounding the dismal, but improving, state of the U.S. economy.
A recent survey of 200 mortgage lending professionals from Lenders One showed that lenders are exuding confidence in the real estate market. In addition, lenders say that millennials, Hispanics, and boomerang buyers will lead the expected gains in business.
According to the survey, 62 percent of lenders surveyed said that they expect mortgage purchase production to increase by an average of 11 percent in 2016. Another 87 percent indicated that the mortgage purchase market will be extremely active.
Mortgage lenders in the housing market said that diverse growth opportunities will be the driving force behind the increase in business. Seventy-nine percent of lenders pointed to millennials as their target, as these young prospects enter into the peak age for purchasing a home. Hispanics were named by 71 percent of lenders surveyed, while non-traditional buyers in the rental and vacation home markets were named by 70 percent of lenders. Boomerang buyers, or those that can now qualify for a mortgage after undergoing a short sale, foreclosure, or bankruptcy, will be targeted by 68 percent of lenders.
“The strong confidence levels we’re seeing among lenders highlight the continued bounce back from one of the most challenging real estate and lending environments in U.S. history,” said Lenders One Interim CEO Dan Goldman. “In an environment where lenders can once again focus on business growth initiatives, it will be more important than ever for mortgage professionals to have access to the tools and ongoing training they need to capitalize on these emerging trends.”
Goldman sat down with MReport to explain why lenders are so optimistic in the housing market today and what they can do to reach untapped borrowers and grow their origination business.
MReport: What is causing the uptick in lender optimism about purchase growth in the housing market when the economic picture was so bleak to start 2016?
Goldman: If you think about the time frame that this survey was done, it was in the first two weeks of January and there definitely was optimism at that point among lenders. Lenders believed that 2016 would be a strong year and there will be more purchase business, and applications seemed to be up a bit. However, closings were not good in December and I say that because of the TILA-RESPA Integrated Disclosure (TRID) rule. A lot of lenders were struggling with TRID at that time from a closing perspective. There was good optimism early January on locks and applications and at that time, lenders felt that they might have a good year ahead of them.
What they were feeling right then was that those applications were purchase-related and not as much on the refinancing side. If we fast-forward to now, where rates have ticked down a bit, I think that lenders are probably seeing more refinances and now the pain associated with TRID has softened a bit. As January progressed and even into February, we were still hearing about the pain associated with TRID, specifically on the closing side of the transaction.
MReport: Explain how lenders are expecting to target millennials, Hispanics, and boomerang buyers populations. How will they get them to enter the housing market?
Let’s start with the millennials. The key piece with millennials has been and always will be technology. Getting in front of these younger buyers with tools that are available will grab their attention. Part of that stems from the advertising that is available. Once an application is taken, either in-person or online, the status and the updating of the process is all being done on Android and iPhone applications. That engages the millennial and gets them involved. They are doing everything online or on the Internet. There are more things happening like an Owners.com or Zillow, where homes are being searched for online. They are engaging Realtors and mortgage companies online.
The boomerang buyer leads themselves to some of the non-qualified mortgage (QM) products that are emerging, still with the Ability-to-Repay but there’s less guidelines and restrictions on products where there was a short-sale, foreclosure, or some type of event in years past the prohibited these buyers from fitting into a conventional application. Federal Housing Administration (FHA) loan are still prevalent for boomerang buyers because there are less stringent guidelines for a mortgage loan.
Hispanics are an untapped market in many areas and I have seen a lot more activity, depending on geographic areas, where lenders are holding information sessions, event, and homebuyer seminars for lenders that have not been in that market and marketing to Hispanic buyers. There’s been quite a bit of activity in the market recently and the expectation from those lenders that were surveyed was those three segments particularly would present opportunities to grow their business.
MReport: What should lender expect in the housing market for the rest of 2016 and beyond in terms of their purchase mortgage origination business?
Goldman: There is still going to be a focus on compliance, which we all understand and expect. There will be a focus on TRID to ensure that everything it encompasses is working properly. There will be a focus on vendor oversight which is becoming more prevalent in the market. There is also a significant focus on education and making sure that the loan officers are educated, trained, and able to target the borrowers for their business. The last piece is technology. Technology will be important because mortgage companies want to be on the cutting edge and using technology to be compliant, capture customers, and for educational purposes. Lender will need to use social media, search engine optimization to be able to reach the right borrower, tech solutions for figuring out underwriter income, and have a handheld application for borrowers to be able to check the status of their loan. This is what I see from an outlook perspective for the remainder of 2016. Lenders will be focused on how to grow their business, capture more purchase business, and with rates so low, pay attention to refinances. It should still be a strong year compared to last year, with the estimated 11 percent purchase originations growth.