Mortgage Bankers Association

Apache is functioning normally

The Federal Housing Administration (FHA) faces a potential loss of roughly $7 billion in receipts in 2024, and a failure by Congress to come to terms on certain spending agreements could force across-the-board cuts to non-defense spending of roughly 5-to-9%.

This is according to a letter published this week by the Congressional Budget Office (CBO), submitted to the chairman and ranking member of the U.S. House of Representatives budget committee.

CBO projections for FHA

“This letter provides CBO’s assessment of the effects of the caps on discretionary funding in fiscal year 2024,” the letter reads. “Those effects will depend on the nature and timing of appropriation legislation and on decisions by [OMB]. If necessary, the caps will be enforced by OMB through sequestration, the process by which across-the-board reductions are applied to budgetary resources.”

If Congress is unable to come to a compromise on government funding — with current continuing resolutions in place in two phases — sequestration would force cuts to both defense and nondefense government spending. The latter would see far more severe cuts, according to CBO.

“In the scenarios CBO examined, if enacted funding equaled the annualized amount of funding under the continuing resolution, sequestration would be required and would result in across-the-board reductions ranging from 5 percent to 9 percent for nondefense funding and from zero to 1 percent for defense funding, depending on when appropriations were enacted and what form they took,” the letter said.

FHA’s lower expected receipts in 2024 are cited by CBO as one of the reasons that nondefense spending could see more severe cuts in 2024, but both housing groups and the agencies themselves have explained that additional resources from Congress are needed to adequately handle the housing challenges across the country today.

MBA, NRMLA advocate for full FHA, Ginnie Mae funding

Leaders in Congress have been entertaining the notion of a 1% cut to housing agencies. In December, leaders at housing advocacy groups including the Mortgage Bankers Association (MBA) and the National Reverse Mortgage Lenders Association (NRMLA) submitted a letter urging leaders in Congress to fully fund FHA and Ginnie Mae.

“The [budget agreement] enacted this past spring contained an overall discretionary spending level of 1% below FY 2023 spending levels,” the letter said. “At this time, it is unclear whether FY 2024 HUD funding will be approved through a traditional conference report, a continuing resolution, or a reversion to the budget agreement default process.”

FHA, the groups said, provides “the most important mortgage option for affordable mortgage loans for first-time, minority, and other underserved homebuyers – responsibly serving qualified borrowers with low down payment requirements or minor credit blemishes,” while Ginnie Mae maintains a “critical role” in the housing ecosystem with its mortgage-backed securities (MBS) program and its other important roles in rural housing and loans for veterans.

A one percent cut to these agencies, the letter said, would “prove inadequate and substantially undermine FHA’s ability to fulfill its baseline responsibilities and pursue the initiatives identified above,” and would “result in harmful mortgage market impacts and taxpayer risks” for Ginnie Mae.

Possible reverse mortgage impacts

A reduction in FHA’s budget could negatively impact the administration of the Home Equity Conversion Mortgage (HECM) program, but another reverse mortgage impact could be from potential cuts to Ginnie Mae due to liquidity challenges being faced in the reverse mortgage business.

After assuming control of Reverse Mortgage Funding (RMF)’s portfolio of HECM-backed securities late last year, Ginnie Mae officials explained throughout last year that the assumption of a large portfolio — estimated to contain as much as one-third of all HMBS issuance as of mid-2023 — necessitated more appropriations from Congress to adequately manage it.

In its 2024 budget request submitted to Congress last March, Ginnie Mae explained some of the challenges inherent in managing the RMF portfolio.

“We continue to spot new issues as we take the RMF portfolio in-house,” Ginnie’s budget request document said. “It has become clear that the HECM program requires enhanced governance across how Ginnie Mae makes decisions […] because the HMBS program presents a heightened set of operational risks for Ginnie Mae, we require additional staff to work through these issues.”

A continuing resolution keeps Ginnie Mae ‘flat’

<img data-attachment-id="435980" data-permalink="https://www.housingwire.com/articles/ginnie-mae-president-offers-commitment-to-reverse-mortgage-securities-program/alannamccargo_gnma_hires/" data-orig-file="https://www.housingwire.com/wp-content/uploads/2024/01/alannamccargo_gnma_hires.jpg" data-orig-size="819,1024" data-comments-opened="1" data-image-meta=""aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"" data-image-title="alannamccargo_gnma_hires" data-image-description="

Alanna McCargo, president of the Government National Mortgage Association (Ginnie Mae).

” data-image-caption=”

Alanna McCargo

” data-medium-file=”https://www.housingwire.com/wp-content/uploads/2024/01/alannamccargo_gnma_hires.jpg?w=240″ data-large-file=”https://www.housingwire.com/wp-content/uploads/2024/01/alannamccargo_gnma_hires.jpg?w=819″ decoding=”async” width=”819″ height=”1024″ src=”https://www.housingwire.com/wp-content/uploads/2024/01/alannamccargo_gnma_hires.jpg?w=819″ alt=”Alanna McCargo, president of the Government National Mortgage Association (Ginnie Mae).” class=”wp-image-435980″ srcset=”https://www.housingwire.com/wp-content/uploads/2024/01/alannamccargo_gnma_hires.jpg 819w, https://www.housingwire.com/wp-content/uploads/2024/01/alannamccargo_gnma_hires.jpg?resize=120,150 120w, https://www.housingwire.com/wp-content/uploads/2024/01/alannamccargo_gnma_hires.jpg?resize=240,300 240w, https://www.housingwire.com/wp-content/uploads/2024/01/alannamccargo_gnma_hires.jpg?resize=768,960 768w, https://www.housingwire.com/wp-content/uploads/2024/01/alannamccargo_gnma_hires.jpg?resize=600,750 600w” sizes=”(max-width: 819px) 100vw, 819px”>

Alanna McCargo

In an interview with RMD late in 2023, Ginnie Mae President Alanna McCargo spoke about some of the challenges in securing additional appropriations considering the narrow political majorities in both houses of Congress.

“We’ve been on a journey to right-size Ginnie Mae since I started, and then the acquisition of this portfolio and with the role we’re playing right now in the reverse industry, [that has] only accelerated our need to have more focus, more resources and more people to do the business that we have to do,” McCargo said.

While there has been some support shown for fully funding Ginnie Mae in Congress, operating off of a continuing resolution has stifled any potential growth in appropriations, she explained.

“Unfortunately, the [continuing resolution] that we’re currently operating under keeps us flat, so it really does slow down our ability to do the hiring and planning that we want and need to do,” McCargo said.

External to the budget issues, Ginnie Mae has taken steps to improve reverse industry liquidity by reducing the minimum size required to create HMBS pools to assist smaller issuers and changing certain pool eligibility requirements to ease some strain.

Source: housingwire.com

Apache is functioning normally

Total mortgage production is expected to fall 16 percent to $1.96 trillion this year, down from an estimated $2.34 trillion in 2007, the Mortgage Bankers Association reported today.

“This would mark the first time since 2000 that total mortgage originations fall below $2 trillion,” the report noted.

The report said total loan origination is expected to fall another four percent to $1.88 trillion in 2009.

The MBA reported that residential purchase mortgage originations will drop by roughly 18 percent in 2008 to $955 billion from an estimated $1.16 trillion last year.

And said that because of tighter underwriting guidelines and falling home prices, refinance originations will decline about 14 percent to $1.01 trillion in 2008 from a projected $1.17 trillion in 2007, and fall a further 13 percent to $883 billion in 2009.

Regarding housing data, the report said total existing home sales for the year will decline by about 13 percent from 2007 to 4.94 million units, but should rise by about four percent in 2009.

Median home prices for new and existing homes are also expected to fall by about two percent this year, but rise between one and two percent in 2009.

The MBA’s Chief Economist Doug Duncan addressed recent capital worries rocking banks, mortgage lenders, and government financiers Fannie and Freddie, but noted that a further credit downturn was unlikely.

“The principal concern of the current credit crisis lies in the possibility that banks will eventually run out of capital. Banks are running up against capital limits as they write down the value of assets at the same time they are putting loans on their balance sheets because the markets for securitized products are essentially closed,” said Duncan.

“Fortunately, the banking system entered the current credit crunch well capitalized, so the danger of a sharp and widespread contraction of credit availability does not seem imminent. The recovery period in financial markets may take longer this time than it has in past financial crises, but a turn for the better still appears to be a good bet later in the year.”

Duncan added that he believes the fed funds rate will be cut at the Federal Open Market Committee meeting later this month, and expects the Fed to focus less on inflationary worries to address concerns about a recession.

He also noted that mortgage rates should continue to remain relatively low, but move slightly higher into 2009.

“The 30-year fixed-rate mortgage yield should trend up only modestly higher over the second half of the year, reaching 6.2 percent by the fourth quarter and edging up just slightly through 2009. Thus, interest rates will still be quite low by historical standards,” said Duncan.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Mortgage demand fell over the holidays despite declining mortgage rates.

Mortgage applications decreased 9.4% for the week ending Dec. 29 compared to two weeks earlier, according to data from the Mortgage Bankers Association (MBA).

The 30-year fixed mortgage rate closed 2023 at 6.76%, more than one percentage point lower than its October peak of 7.9%, according to Joel Kan, MBA’s vice president and deputy chief economist.

“The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response, with the overall level of purchase activity 12% lower than a year ago,” Kan said in a statement.

Purchase applications decreased by 5% week over week on an adjusted basis. Meanwhile, refinance applications remained at very low levels but were 15% higher than a year ago.

“The housing market has been hampered by a limited supply of homes for sale, but the recent strength in new residential construction will continue to help ease inventory shortages in the months to come,” Kan added. 

The share of Federal Housing Administration (FHA) loan activity decreased to 14.5% from 15% the week prior. The share of Department of Veterans Affairs (VA) loan activity was 14.6%, down from 17.3% over the previous week, while the share of U.S. Department of Agriculture (USDA) loan activity increased to 0.5% compared to 0.4% the previous week. 

Source: housingwire.com

Apache is functioning normally

Home lending slowed to close out 2023, as borrowers appeared to take the holidays off, and markets reacted to the expectation that lower interest rates are on their way, according to the Mortgage Bankers Association.        

In the final release looking at 2023 volumes, the MBA’s Market Composite Index, which tracks weekly application activity based on surveys of the trade group’s members, fell a seasonally adjusted 9.4% from 14 days earlier for the period ending Dec. 29. Compared to the last full week of 2022, incoming applications dropped by 6%. Data included a holiday adjustment, with the trade group tracking, but not publishing, survey results over Christmas week.

The swift pullback in interest rates came to a halt as well, with the main conforming average among MBA lenders edging higher for the first time in seven weeks. 

“Markets continued to digest the impact of slowing inflation and potential rate cuts from the Federal Reserve, helping mortgage rates to stay at levels close to the lowest since mid-2023,” said Joel Kan, MBA vice president and deputy chief economist, in a press release. 

The 30-year fixed conforming rate for mortgages rose by 5 basis points last week to 6.76% from 6.71% seven days earlier. Borrower points also increased to 0.61 from 0.55 for 80% loan-to-value ratio transactions. 

While moderating rates pushed application volumes higher during much of November and December, borrowers paused at the end of the year, leading to decreases in both purchases and refinances.  

“The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response,” Kan said.

The seasonally adjusted Purchase Index slid 5.4% from two weeks earlier and sat 12.2% below its level from a year ago. But slowly growing inventory points to potential opportunities for lenders if recent trends continue, as sellers list more homes in response to lower rates. Recent surveys also point to solid consumer demand, particularly among first-time buyers.  

Meanwhile, the Refinance Index plummeted 18.2% over the final two weeks of 2024, but climbed up 15.2% year over year “still at very low levels,” according to Kan. The share of refinances relative to overall volumes fell to 36.3%, declining from 39.4% and 39.7% the prior two weeks. Some industry leaders, though, see some hopes for a small pick-up in refinances over the coming months should rates decline as hoped. 

Government-backed activity, which saw some significant jumps in the fall, pulled back over the final two weeks of the year. The seasonally adjusted Government Index declined 13.4%, and the percentage of federally guaranteed loan activity also shrank. Applications coming through the Federal Housing Administration decreased to 14.5% from 15% week over week, and Department of Veterans Affairs-sponsored volumes contracted to 14.6% from 17.3% seven days earlier. U.S. Department of Agriculture-backed applications managed to nab an incrementally larger slice of 0.5%, rising from 0.4% a week earlier. 

Other 30-year mortgage rates tracked by the MBA also edged higher to finish 2024. The average contract rate of the 30-year jumbo mortgage climbed up a single basis point to 6.86% from 6.85% seven days prior. Points used to bring down the rate increased to 0.41 from 0.34.

The 30-year fixed-contract FHA-backed mortgage ended the year at an average of 6.51, also rising one basis point from 6.5% week over week. Points came in at 0.86, rising from 0.73 for 80% LTV-ratio loans. 

The contract 15-year fixed rate headed in the other direction, though, falling 15 basis points to 6.26% from 6.41%. Borrowers typically used 0.73 worth of points compared to 0.5 a week earlier. 

The 5/1 adjustable-rate mortgage took an even larger weekly drop of 55 basis points, falling to an average of 5.71% from 6.26%. Points remained at 0.59 from one week prior. Despite the decline, the share of adjustable-rate mortgage applications decreased to 6% of total activity from 6.3%.

Source: nationalmortgagenews.com

Apache is functioning normally

If you spent your teenage years waiting anxiously for one of your siblings to get out of the shower, the idea of selling your spacious, multi-bathroom home and moving into a smaller house or condo may feel like a reversal of fortune.

Yet for many retirees, downsizing makes financial and practical sense. Younger baby boomers — those currently ranging in age from 57 to 66 — made up 17% of recent home buyers, while older boomers — ages 67 to 75 — accounted for 12%, according to a 2022 report from the National Association of Realtors Research Group. Boomers’ primary reasons for buying a home were to be closer to friends and family, as well as a desire to move into a smaller home, the report said. Both younger and older boomers were more likely than others to purchase a home in a small town, and younger boomers were the most likely to buy in a rural area.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.

Profit and prosper with the best of expert advice – straight to your e-mail.

For retirees Fred and Shelby Bivins, selling their home in Green Valley, Ariz., will enable them to realize their dream of traveling in retirement. The Bivinses have put their 2,050-square-foot Arizona home on the market and plan to relocate to their 1,600-square-foot summer condo in Fish Creek, Wis., a small community about 50 miles from Green Bay. They plan to live in Wisconsin in the spring and summer and spend the winter months in a short-term rental in Arizona, where they have family.  

Fred, 65, says the decision to downsize was precipitated by a two-month stay in Portugal last year, one of several countries they hope to visit while they’re still healthy enough to travel. “We’ve had Australia and New Zealand on our list for many years, even when we were working,” says Shelby, 68. The Bivinses are also considering a return visit to Portugal. Eliminating the cost of maintaining their Arizona home will free up funds for those trips. 

With help from Chris Troseth, a certified financial planner based in Plano, Texas, the Bivinses plan to invest the proceeds from the sale of their home in a low-risk portfolio. Once they’re done traveling and are ready to settle down, they intend to use that money to buy a smaller home in Arizona. “Selling their primary home will generate significant funds that can be reinvested to support their lifestyle now and in the future,” Troseth says. “Downsizing for this couple will be a positive on all fronts.”

Challenges for downsizers 

For all of its appeal, downsizing in today’s market is more complicated than it was in the past. With 30-year fixed interest rates on mortgages recently approaching 8%, many younger homeowners who might otherwise upgrade to a larger home are unwilling to sell, particularly if it means giving up a mortgage with a fixed rate of 3% or less. More than 80% of consumers surveyed in September by housing finance giant Fannie Mae said they believe this is a bad time to buy a home and cited mortgage rates as the top reason for their pessimism. “This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon,” Fannie Mae said in a statement. As a result, buyers are competing for limited stock of smaller homes, says Hannah Jones, senior economic research analyst for Realtor.com. 

Here, though, many retirees have an advantage, Jones says. Rising rates have priced many younger buyers out of the market and made it more difficult for others to obtain approval for a loan. That’s not an issue for retirees who can use proceeds from the sale of their primary home to make an all-cash offer, which is often more attractive to sellers. 

Retirees also have the ability to cast a wider net than younger buyers, whose choice of homes is often dictated by their jobs or a desire to live in a well-rated school district. While the U.S. median home price has soared more than 40% since the beginning of the pandemic, prices have risen more slowly in parts of the Northeast and Midwest, Jones says. “We have seen the popularity of Midwest markets grow over the last few months because out of all of the regions, the Midwest tends to be the most affordable,” she says. “You can still find affordable homes in areas that offer a lot of amenities.” 

Meanwhile, selling your home may be somewhat more challenging than it was during the height of the pandemic, when potential buyers made offers on homes that weren’t even on the market. The Mortgage Bankers Association reported in October that mortgage purchase applications slowed to the lowest level since 1995, as the rapid rise in mortgage rates has pushed many potential buyers out of the market. Sales of previously owned single-family homes fell a seasonably adjusted 2% in September from August and were down 15.4% from a year earlier, according to the National Association of Realtors. “As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” NAR chief economist Lawrence Yun said in a statement. 

However, because of tight inventories, there’s still demand for homes of all sizes, Jones says, so if your home is well maintained and move-in ready, you shouldn’t have difficulty selling it. “The market isn’t as red-hot as it was during the pandemic, but there’s still a lot to be gained by selling now,” she says.

Other costs and considerations 

If you live in an area where real estate values have soared, moving to a less expensive part of the country may seem like a logical way to lower your costs in retirement. While the median home price in the U.S. was $394,300 in September, there’s wide variation in individual markets, from $1.5 million in Santa Clara, Calif., to $237,000 in Davenport, Iowa. But before you up and move to a lower-cost locale, make sure you take inventory of your short- and long-term expenses, which could be higher than you expect. 

Selling your current home, even at a significant profit, means you will incur costs, including those to update, repair and stage it, as well as a real estate agent’s commission (typically 5% to 6% of the sale price). In addition, ongoing costs for your new home will include homeowners insurance, property taxes, state and local taxes, and homeowners association or condo fees.

Nicholas Bunio, a certified financial planner in Berwyn, Pa., says one of his retired clients moved to Florida and purchased a home that was $100,000 less expensive than her home in New Jersey. Florida is also one of nine states without income tax, which makes it attractive to retirees looking to relocate. Once Bunio’s client got there, however, she discovered that she needed to spend $50,000 to install hurricane-proof windows. Worse, the only home-owners insurance she could find was through Citizens Property Insurance, the state-sponsored insurer of last resort, and she’ll pay about $8,000 a year for coverage. Her property taxes were higher than she expected, too. When it comes to lowering your cost of living after you downsize, “it’s not as simple as buying a cheaper house,” Bunio says 

Before moving across the country, or even across the state, you should also research the availability of medical care. “Oftentimes, those considerations are secondary to things like proximity to family or leisure activities,” says John McGlothlin, a CFP in Austin, Texas. McGlothlin says one of his clients moved to a less expensive rural area that’s nowhere near a sizable medical facility. Although that’s not a problem now, he says, it could become a problem when they’re older. 

If you use original Medicare, you won’t lose coverage if you move to another state. But if you’re enrolled in Medicare Advantage, which is offered by private insurers as an alternative to original Medicare, you may have to switch plans to avoid losing coverage. To research the availability of doctors, hospitals and nursing homes in a particular zip code, go to www.medicare.gov/care-compare.

At a time when many seniors suffer from loneliness and isolation, a sense of community matters, too. Bunio recounts the experience of a client who considered moving from Philadelphia to Phoenix after her daughter accepted a job there. The cost of living in Phoenix is lower, but the client changed her mind after visiting her daughter for a few months. “She has no friends in Phoenix,” he says. “She’s going on 61 and doesn’t want to restart life and make brand-new connections all over again.”

Time is on your side 

Unlike younger home buyers, who may be under pressure to buy a place before starting a new job or enrolling their kids in school, downsizers usually have plenty of time to consider their options and research potential downsizing destinations. Once you’ve settled on a community, consider renting for a few months to get a feel for the area and a better idea of how much it will cost to live there. Bunio says some of his clients who are behind on saving for retirement or have high health care costs have sold their homes, invested the proceeds and become permanent renters. This strategy frees them from property taxes, homeowners insurance, homeowners association fees and other expenses associated with homeownership 

The boom in housing values has boosted rental costs, as the shortage of affordable housing increased demand for rental properties. But thanks to the construction of new rental properties in several markets, the market has softened in recent months, according to Zumper, an online marketplace for renters and landlords. A Zumper survey conducted in October found that the median rent for a one-bedroom apartment fell 0.4% from September, the most significant monthly decline this year. 

In 75 of the 100 cities Zumper surveyed, the median rent for a one-bedroom apartment was flat or down from the previous month. (For more on the advantages of renting in retirement, see “8 Great Places to Retire—for Renters,” Aug.)

Aging in place

Even if you opt to age in place, you can tap your home equity by taking out a home equity line of credit, a home equity loan or a reverse mortgage. At a time when interest rates on home equity lines of credit and loans average around 9%, a reverse mortgage may be a more appealing option for retirees. With a reverse mortgage, you can convert your home equity into a lump sum, monthly payments or a line of credit. You don’t have to make principal or interest payments on the loan for as long as you remain in the home. 

To be eligible for a government-insured home equity conversion mortgage (HECM), you must be at least 62 years old and have at least 50% equity in your home, and the home must be your primary residence. The maximum payout for which you’ll qualify depends on your age (the older you are, the more you’ll be eligible to borrow), interest rates and the appraised value of your home. In 2024, the maximum you could borrow was $1,149,825.

There’s no restriction on how homeowners must spend funds from a reverse mortgage, so you can use the money for a variety of purposes, including making your home more accessible, generating additional retirement income or paying for long-term care. You can estimate the value of a reverse mortgage on your home at www.reversemortgage.org/about/reverse-mortgage-calculator.

Up-front costs for a reverse mortgage are high, including up to $6,000 in fees to the lender, 2% of the mortgage amount for mortgage insurance, and other fees. You can roll these costs into the loan, but that will reduce your proceeds. For that reason, if you’re considering a move within the next five years, it’s usually not a good idea to take out a reverse mortgage.

Another drawback: When interest rates rise, the amount of money available from a reverse mortgage declines. Unless you need the money now, it may make sense to postpone taking out a reverse mortgage until the Federal Reserve cuts short-term interest rates, which is unlikely to happen until late 2024 (unless the economy falls into recession before that). Even if interest rates decline, they aren’t expected to return to the rock-bottom levels seen over the past 15 years, according to a forecast by The Kiplinger Letter. And with inflation still a concern, big rate cuts such as those seen in response to recessions and financial crises over the past two decades are unlikely. 

Note: This item first appeared in Kiplinger’s Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

Source: kiplinger.com

Apache is functioning normally

After nearly two years of trudging through a frozen housing market, the consensus among mortgage professionals is that the worst of it is over.

The Federal Reserve recently signaled plans to slash interest rates three times in 2024, shifting toward the next phase in its monetary policymaking.

“It finally seems like we are turning a corner and that’s good news after two years of the Fed’s negative perspective that we’ve heard,” Max Slyusarchuk, CEO of A&D Mortgage, said in an interview.

The spread between the 30-year fixed-rate mortgage and the 10-year Treasury yield has narrowed after sitting at over 300 basis points, compared to the historic norm of 150 bps. 

But how much will the decline in mortgage rates and a narrowing of the spreads breathe life into the dour origination landscape?

“At the end of the day if mortgage rates come down, I don’t just think that’s gonna solve the inventory problem right away,” said Ben Cohen, managing director at Guaranteed Rate.

“There’s still going to be a lag. So my concern is that rates are going to come down but inventory is not going to just all of a sudden be plentiful and now we’re in a situation where home prices get driven up because there is still low inventory. You have all these buyers that have been waiting for rates to come back and now they’re back and all this becomes really competitive again.”

Mortgage professionals say 2024 will be a ‘recovery year’ as markets slowly return to normal. But a combination of factors – high home prices, lack of inventory, elevated rates — temper expectations for even a moderately strong year. 

HousingWire interviewed a dozen loan officers and mortgage executives about their strategies for 2024, which mortgage products they expect to be in demand, and the magic rate needed to get sellers and buyers back in the market.

Strategies for 2024

I’m heavily focused on recruiting, improving technology and marketing, empowering the loan officers — by giving them the same technology and marketing support. Whatever I have for me, I will do it for them as well. This way I can help them grow their business. 

We will use AI to help with customer service. AI can understand the loan status, a loan profile and AI can respond to the consumer. If they want to know what’s going on with rates, their loan, AI can give them an answer. 

The second project I’m working on is having a mobile app where the the client can download the app and use it to take care of their transaction. We are going to shift to using a mobile app so we don’t have to use phone calls, emails and text messages anymore.

— Thuan Nguyen, CEO of Loan Factory, Inc.

A lot of what you hear is very cliche-ish. You have to make more calls, got to call on more people — all that is true.

But I think it’s more complex than that.

A successful loan officer in this market needs a very capable qualified assistant. I think they need to have all systems firing, meaning they’ve got to do the traditional stuff where you’re doing broker open houses, you’re going to open houses, you are doing coffee clutches and breakfasts and all that. 

Simultaneous to that, I think you got to be heavily engaged in what I call the ‘virtual war’ and that means you’re driving your social media and you’re in your your subscribing to systems that drive alerts to your database’s activity. And then you have to have a process in a system to manage those alerts and have outreach to those alerts to where you’re capitalizing on them in a quick time. 

— John Palmiotto, chief production officer at The Money Store

What people who don’t understand marketing have done is unintentional marketing. They’re just doing what they see everybody else doing and what we’re finding is those who are succeeding today and are going to thrive in 2024 have a lot of intention in their social media. 

It’s not social media, it’s social networking. Networking has always been a key component to drive growth and fostering true community with your referral partners and your sphere of influence. So you have to be intentional, you have to be very strategic – understanding the audience that you’re going after and leveraging it as a social networking platform. 

— Shane Kidwell, CEO of Dwell Mortgage

We’re now having to put in work every day without necessarily reaping the immediate reward. Staying disciplined to putting in the effort every single day at the absolute highest level even though we’re not going to see the immediate reward.

We’re laying the constant groundwork word doing the agent training. We’re doing it to where some of that is not reaping us rewards here. It’s that type of mindset that we have to have, because luck is hard work meeting opportunity.

— Matt Weaver, VP of mortgage sales at CrossCountry Mortgage

I recently got licensed in the state of Ohio because that’s where I’m from. I have a lot of connections in Ohio. I’m comfortable with lending there because I know I’m very familiar with the area. I think a lot of my friends and family members and circle of influence up there are going to be refinancing in the next six, 12, 18 months and I want to be licensed and ready to go when that time comes so that I can help them. 

— Justin McCrone, loan officer at Atlantic Coast Financial Services

Origination goals

I would be happy with doing $65 million to $75 million next year. I left and joined Revolution in 2023 for a couple months with no origination, I’m probably gonna hover around $50 million this year, whereas I did $100 million in 2022 at Guaranteed Rate. 

— Larry Steinway, senior vice president of mortgage lending and branch manager of Revolution Mortgage

The Mortgage Bankers Association (MBA) has a report on where they think the business is going, you have Fannie Mae on where they think the business is going. We look at all that and then we look at the size of the sales team, who we’ve recruited, what we think how much business will pick up.

I think the first quarter is going to be tough. And I think it’ll pick up once you get past the first quarter spring market and on. So we’re planning for a 20% increase.

— Jon Overfelt, director of sales and principal at American Security Mortgage Corp.

I think I’m doing marginally better than this year. We’re now looking at a declining rate environment versus the rising rate environment.  So that will allow people to be more optimistic. I would imagine we’ll be about 10 to 15% better next year than this year. 

— Robby Oakes, managing director at CIMG Residential Mortgage

Given the rate cycle over the past two years and the record level of available home equity that consumers are sitting on, the second mortgage market is a huge opportunity for originators to serve the cash-out and debt consolidation needs of their clients without touching their low rate first mortgage, make much needed origination income and keep the client close so they can service them again in the next cycle. Home equity is really a no-brainer today. 

Non-QM is also a huge opportunity for originators to serve the needs of their clients and make much needed origination income. Originators will be battling it out again next year for purchase and refinance volume again that fall into the standard agency, government, jumbo buckets. The rate and term and cash-out refinance market will rely on rates decreasing, but even if they move to 6% next year, the industry will struggle with refinances.

— Paul Saurbier, SVP of strategy at Spring EQ

There’s a big push for home affordability. So there’s a lot of programs out there for first-time homebuyers based on where they’re actually buying their home and what their income is. There’s incentives for those people to get into the home a little bit cheaper than who’s already been a homeowner and can’t take advantage of those programs. 

So to me, it’s still a big first-time buyer market in 2024. I’m not saying there are people that are existing but the people that are existing homeowners are only going to move if they absolutely have to move.

–Ben Cohen, managing director at Guaranteed Rate

I think for sure the non-QMs – the more flexible guideline programs are going to continue to be big, especially for people who are investors or self-employed aging populations.

Obviously for people with good credit, good income, solid assets, the 30-year fixed conventional mortgages is the most amazing program that exists for consumers because you don’t have any risk if rates go up and if rates go down you get to refinance and get a lower rate.

I don’t know if it’s national, but 30% of deals right [in my market in California] now are all-cash and so competing against all-cash is still going to be a concern for folks. So that means our job is not only to get them educated on their loan options, but also to make sure we are solid so we get fully underwritten files, making sure we do a lot of work on the front-end so we’re not missing out on deals.

— Brady Thomas, branch manager at American Pacific Mortgage

Home equity products will continue to be attractive options for homeowners looking for specific needs. Based on the goals of the homeowner, Adjustable Rate Mortgages (ARMs) may offer some flexibility. As rates start to tick down throughout 2024, traditional refinances will begin to make more financial sense, as well.

— Michael Merritt, SVP of customer care and default mortgage servicing at BOK Financial

Magic rate?

I would say 5.5%. But the issue is home prices are too high. In order to have the market return to normal, they have to come down a lot more. If rates and prices both come down, it’s easier. But this time, the price might not come down so we have to rely on the rates.

— Thuan Nguyen – CEO of Loan Factory, Inc.

When we get rates in the 5%, I think it’s gonna be fun to be in this business again because people will be willing to leave their 3% interest rate. I think we are going to see (traditional) refinancing transactions really start to kick in in the second half of 2024, 2025.

— Larry Steinway, senior vice president of mortgage lending and branch manager of Revolution Mortgage

I think if we get rates to come down into the 5% range, that’s going to help quite a bit. If people got rates of 7% and 7.5% and they can get a rate at 5%, that’s a refi boom for all of those buyers.

I think rates in the 5%-range or low 6% levels will bring buyers back to the market, but I don’t think we would get a ton of sellers until we have rates in the 4% or low 5%. Somebody who might want to move because they need an extra bedroom or want a bigger backyard won’t move if rates are still at 6% and they’re going from a rate of 3%. But they might do it if they’re getting 4.5%. 

— Brady Thomas, branch manager at American Pacific Mortgage

Business was really busy when they were in the low 6% range and the high 5% levels. If you look back earlier in the year when we had the banking crisis hit, business picked up a lot then and that’s about where rates were – in the high 5%, low 6%. I think somewhere in there, you would see a pretty good pickup. 

— Jon Overfelt, director of sales and principal at American Security Mortgage Corp.

The question people should be asking is at what rate threshold will sellers come back into the market. Given the average mortgage rate is 3.7%, and considering the pent-up deferred sales pressure is growing each day, our view is that somewhere around 5.5% will be a key threshold to attract sellers in a way that brings supply-demand parity into closer balance.

— Jack Macdowell, chief investment officer at Palisades Group

The number will be different based on the goal of the customer. If customers are looking for home improvement, debt consolidation or other spending goals, Home equity products can be positive at current rates. As rates work back towards 6%, I think you will begin to see more refinance options open up.

— Michael Merritt, SVP of customer care and default mortgage servicing at BOK Financial

Our definition of a magic number indicates the rate at which more than half of the buyers are willing to buy. We have an analytical department that analyzes the purchasing power of the U.S. in the past 40 years and they are saying it’s 6.25%. At 6.25%, a majority of people would say, ‘I’m OK to buy.’ That’s when supply and demand will equalize and your property is not going to drop or rise in value.

— Max Slyusarchuk, CEO of A&D Mortgage

Source: housingwire.com

Apache is functioning normally

In his 20 years in mortgage banking, no year has compared to 2023 in terms of difficulty, said Ben Cohen, Guaranteed Rate’s managing director and a top-producing loan officer. 

“This is a lot different than 2008 where you needed a credit score and a heartbeat to get a mortgage. Now, you need to be very qualified in order to get a mortgage,” he said. 

Coming off of the pandemic banner years, thinning origination volume, low inventory and soaring home prices made business much harder to come by for LOs in 2023. It was another brutal year, pushing loan originators to work longer hours, close loans faster while diversifying their mortgage product offerings. 

According to data from Ingenius, tens of thousands of loan officers exited the industry in 2023. In October, 67% of current LOs produced less than one unit of closed loans in October. An additional 21% closed 1.5 units per month and only 12% closed greater than 2.5 units.

With the Federal Reserve signaling interest rate cuts in 2024, mortgage rates are expected to trend lower going forward. But the industry was on a roller coaster with rates climbing near 7% in February and hitting 8% in October as the central bank battled to bring down high inflation.

LOs had to fight an uphill battle of targeting the purchase market in an environment with a rate ‘lock-in’ effect, go after first-time homebuyers and offer customized solutions to bring down monthly mortgage payments. 

“Every single client scenario is different,” said Hunter Marckwardt, executive vice president of CrossCountry Mortgage. “[The year] 2020 and 2021 was all about how quickly a lender could execute. To me, 2023 is really all about understanding a buyer’s motivation and ability to qualify, and then determining where to go from there.”

Wrapping up the year, HousingWire analyzed some of the key factors that defined 2023 for loan originators and how they stayed competitive. 

Rate ‘lock-in’ effect 

By some measures, it was always going to be a difficult year for originators. According to Black Knight data, 40% of all U.S. mortgages were originated in 2020 or 2021, when the pandemic drove borrowing costs to historic lows. The customer pool by 2023 had already shrunk dramatically.

And about 90% of mortgage holders had a rate that was less than 6%; some 80% with a rate less than 5%; and almost a third had a rate less than 3%, meaning refi opportunities would be hard to come by.

Having already secured a mortgage with a sub-4% rate, homeowners were highly reluctant to sell their homes and move into another property. 

“All things generally equal, and you’ve just wanted a little bit of a bump in the quality of your home, you’re not moving based on the difference in payments,” said Marckwardt. 

The so-called mortgage rate ‘lock-in’ effect gave homeowners an incentive to stay put, preventing more housing supply from reaching the market.

“We’ve seen a consistent theme of potential sellers – many with first-lien rates a full 3 percentage points below today’s offerings – pulling back from putting their homes on the market,” said Andy Walden, Intercontinental Exchange, Inc. (ICE) vice president of enterprise research.

“The inventory puts a cap on how much business we can do. When loan officers don’t have refinance business, half of their businesses are gone,” said Andrew Marquis, regional vice president at CrossCountry Mortgage, in a previous interview.

The lack of inventory led to rising home prices, creating multiple-offer situations in some parts of the country. It all put more pressure on affordability. 

“I’ve got several pre-approvals out there where people just can’t find what they want and the rates are throwing them off,” Don Monson, branch manager at Sente Mortgage, said of the challenges he faced in 2023. 

Targeting first-time homebuyers

Those who catered to first-time homebuyers’ needs – offering Federal Housing Administration (FHA) loans and down payment assistance loans – fared relatively well compared to other colleagues who didn’t expand their target clients.  

“Loan officers, myself included, who have worked a lot with first-time buyers and have working knowledge of various programs – whether it be FHA, Home Ready/Home Possible, bond programs (DPA/grant programs). They are staying busy relative to the market,” said Michael Ullmann, producing branch leader at Movement Mortgage.

About half of Ullmann’s production in 2023 came from VA and FHA loans as well as mortgages that require down payment assistance. Most years that number is closer to 30%, said Ullmann, who’s been an LO since 2012.

Borrowers extended their qualifications beyond where they would have been in the past at lower interest rate environments, choosing FHA loans that have more lenient qualification requirements than other loans. 

“Today, in a higher interest rate environment, they (borrowers) might be pushing the limit to a 45 or 50% DTI ratio to achieve the same type of home in a higher rate environment,” said Steve Miller, branch manager and senior loan officer at Embrace Home Loans.

Mandatory mortgage insurance premiums were reduced to 55 basis points (bps) for most borrowers in February, and FHA loans tend to come with lower interest rates than conventional loans while the difference in interest rates could often be offset by the greater number of fees — including the MIP charges.

A myriad of down payment assistance programs — offered through state housing finance agencies, cities and counties — made it possible for some first-time buyers to stop renting and own a home without a large down payment. 

With origination volume thinning, nonbank lenders also rolled out DPA programs where the lender would cover 2% of the required 3% minimum down payment on a conventional loan.

Due to lack of origination volume and higher rates, mortgage lenders are “pushing the envelopes again,” said Bill Gourville, president at Atlantic Coast Financial Services. 

“They in the past shied away from just because there was other volume to be had. So they’re consistently pushing the envelope on programs that have technically always been available by agencies – Fannie Mae, Freddie Mac, FHA and VA – but now they’re rolling it back out,” Gourvill explained. 

Lowering monthly mortgage payments  

“The biggest factor and the biggest pain point that the consumers are having is what they’re willing to pay per month,” said Adrian Gastelum, senior vice president and branch manager at Nova Home Loans. 

“So when I look at what’s deterring clients right now, is sticker shock,” Gastelum added. 

As buyers’ affordability got crushed with elevated rates, homebuyers demanded that their loan originators provide options to lower monthly mortgage payments.

Temporary rate buydowns – a product that lenders started rolling out in 2022 – often made more sense for buyers planning to live in the home long term as they are more likely to have a refi opportunity during that time period. 

While a seller-funded temporary buydown may not be available depending on how hot market conditions are, builders are more willing to provide these concessions as they are more incentivized to fill up new inventory. 

“If buyers wanted to get a new build, this is definitely a good time to get a new build even with rates being a little bit higher because they’re going to come back down at some point and then you can just refinance,” said Simon Herrera, a loan officer at Highlands Residential Mortgage.

“Sellers are funding temporary rate buydowns but It’s really kind of a case by case. Builders for sure are doing it,” Herrera noted. 

Some borrowers were more comfortable permanently buying down points as they preferred predictability when it came to making monthly mortgage payments. 

“I let them know their options. These are the options you can do and here are the pros and cons of this (…) About 90% of the conversation we’re having, [I’m hearing] we don’t want to look at something temporary. We want to make sure we know what our payments are going to be,” said Jared Sawyer, a sales manager at loanDepot.

Nurturing referral partners, training agents 

Mortgage origination volume for 2023 are expected at around $1.64 trillion, according to the Mortgage Bankers Association (MBA). About 80% of that figure, or $1.32 trillion, are projected to be purchase origination. 

To go after the purchase market, LOs prioritized focusing on nurturing relationships with real estate agents — their main referral partners.

“People always know people [who are] buying. People always have friends doing something — and people [are] becoming investors buying second homes, third homes — so it’s just good to stay in front of them, because you don’t realize until you look back on how many people you actually probably lost by not staying in front of them,” said Christopher Gallo, senior vice president and mortgage consultant at CrossCountry Mortgage

“We look to follow up with those agents, invite them to lunches or dinners, coffee, etc. It’s all about the referral partner positioning. How can you make them look good in their business? Because ultimately, they want to be able to close more business, and you have to be an ally in that process. That’s the tactic that we take.” Marquis said.

Educating referral partners is key, which is why Cohen started a newsletter in March so partners can speak at a high level of what’s going on in the market. He sends them weekly updates on Fridays detailing the trends in interest rates and home prices.

“The wonderful thing about my business is everybody is a referral source, whether it’s a past client [or] a neighbor,” said Cohen.

Source: housingwire.com