We’ve had a lot to talk about this year. There’s been the historic presidential election; the discovery of “Murder Hornets” in Washington; a record year for mortgage origination volume…and…I’m forgetting something else.
In the meantime, it’s time to look ahead to 2021. By now, you’ve heard about the FHA’s new “Adverse Market” fee. We also know just about nothing about what our overall economy (including things like consumer confidence, unemployment and the like) will look like over the next six to twelve months. Because of developments like these (plus many other things), we also know that, as much as we’d like it to continue, the refinance explosion is now just about over.
However, many prominent economists are still predicting a strong purchase mortgage market in the coming year. But not everyone greets that news with warmth and joy. After all, originating a refinance mortgage is a lot easier, a lot cheaper and a lot faster for lenders. It’s pretty much the borrower, loan officer and underwriter, plus a few basic documents. It’s a clear path to profit. What’s not to like?
Purchase mortgages, however, are messy compared to refinances. Now, TRID really comes into play. A bunch of additional people (REALTORS, sellers, inspectors, appraisers, title agencies…) have more to add to the discussion and process than you’ll see in a re-fi.
And that’s where the true flaw in the mortgage production process as we know it lies. Communication. Information exchange. The sudden and unexpected introduction of new variables (The property fails inspection. The seller changes his mind. Underwriting adds a wrinkle.) that can derail the transaction altogether.
As you know, we as an industry tend to communicate in a mish-mosh of ways. Phone calls. Texts. Emails. Maybe a silo-building “solution” here and there which addresses only one small part of the transaction, while the L.O. using it needs to log into 3 other “solutions” to address other elements of the same transaction. Heck—some folks still rely on fax machines.
This. THIS is where we have a lot of work to do as an industry.
You’ll be hearing about this topic from me and many others a lot this year. We haven’t had a lot of true purchase markets in the last 15 years. It’s seemingly been one giant, interest rate-fueled re-fi party with a short counter cycle for REO and foreclosure.
A strong purchase market, I predict, will reacquaint us with where our process still needs work. But don’t worry. I won’t dwell too much on what’s wrong. We’ll be focused, instead on solutions, and what we can do to improve.
Have a few questions of your own? Ideas or suggestions for future topics? Please share with me at firstname.lastname@example.org.