Deeper Thoughts
MBA Forecast Gives Us Something to Think About. – October 28th, 2020



Issue #46: MBA Forecast Gives Us Something to Think About.


As you know, the MBA Annual took place virtually last week. This is one of my favorites each year, and I missed being able to get together with old friends and colleagues while making new friends. Nonetheless, one of the things I look forward to each year is the MBA Annual Forecast (usually issued or revised at the convention).
And this one is a doozy.
You can get some great insight on the forecast from thought leader David Stevens here. Here are a few of my own.
First, the MBA is projecting that the total origination volume for this, the weirdest of all years, to be around $3.18 trillion. The second most ever. Ever. Who saw that coming 18 months ago?
Second, the MBA sees an end to the endless refinance boom we’ve been enjoying for over a year now. It seems we’re out of mortgages to refinance. They’re all refinanced already. Just kidding. Sort of.
So, as I’ve mentioned here before, what’s next? The business is out there. MBA also suggests purchase mortgage origination will boom, leading us to a 2021 that’s better than 2019. I don’t know about you, but until 2020, I was pretty happy with my 2019!
Now, remember the overall mood in our industry back in 2018, as that refinance spike began to abate. The talk was that it was time (finally) to prepare for a purchase market. I haven’t been in the industry dozens and dozens of years, but the tone and the mood around the industry struck me. Many of my more experienced friends and peers were also struck by that mood. It was as if some kind of catastrophe or recession was coming. I heard quite a few stories about the days where the interest rates floated in the low teens, and lenders looked forward to purchase markets. Admittedly, refinance loans are among the easiest and most profitable to produce. But, in the “good old days,” the industry was much more predictable as to its cycles. A purchase boom was much more fun than, say, a default cycle.
Then again, we haven’t seen a true default/foreclosure/REO surge in well over a decade.
I’m hearing a lot of folks talking about gearing up for Non-QM refinance again. And that may well be where the refinance action is in the coming months. Mr. Stevens describes the scenario very well—the article is well worth your time.
But as he says (quoting Wayne Gretzky), “the winners are the ones who ‘go where the puck is going’.” I’d agree. It’s time for us to greet the coming purchase market, and be sure our processes are ready, too.
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