Featured Article for Scotsman Guide by Jim Paolino, CEO, LodeStar Software Solutions
There’s no getting around it: It’s increasingly likely that 2021 will be a much different year for the mortgage industry. The Federal Housing Finance Agency’s confirmation of an “adverse-market refinance fee” on loans sold to Fannie Mae and Freddie Mac, the possibility of higher interest rates and an uncertain U.S. economic outlook all point to a year during which, at some point, refinance demand will decline. But there still are opportunities for originators.
Fannie Mae’s forecast this past December anticipated that total origination volume of $4.29 trillion by the end of 2020 would give way to a volume of $3.47 trillion in 2021. Much of this decline is expected to come at the expense of refinance volume.
At the same time, the forecast by the Mortgage Bankers Association (MBA) as of January 2021 predicts record purchase activity in the coming few years. For starters, MBA is predicting $1.57 trillion in purchase mortgage origination volume in 2021, an increase from the $1.42 trillion anticipated by the end of 2020.
By many accounts, 2021 will still be a good year but only for those willing and able to succeed in the purchase market. It’s fairly well-established that a refinance mortgage is faster, cheaper and less troublesome to bring to closing than a purchase mortgage. In a traditional purchase-oriented market, a lender’s expenses rise and per-loan profits decline.
Although traditional marketing and sales positioning for a purchase-dominated market includes ramping up sales efforts and networking with local real estate brokerages, there’s another important element that often gets overlooked: production efficiency. Too many lenders over-look the potential cost savings in process improvement, especially for a purchase market. It’s an omission that’s likely costing them significantly. Originators will want to work with lenders that understand this concept.
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