Total Mortgage Services LLC has highlighted five key trends likely to impact the mortgage industry and housing market in 2011. The mortgage and housing markets continue to be impacted by the housing crisis, a crisis which has fundamentally and permanently altered these businesses. In 2011, we expect the mortgage and housing markets to continue to undergo rapid changes. However, those who are able to rise to these challenges and opportunities will be able to survive and prosper in the new year.
Here are a few mortgage industry trends I see for 2011:
►Quality mortgage brokers will survive and remain relevant: Mortgage brokers, who are committed to extensive product knowledge, ethical behavior, and the highest levels of customer service, provide significant value to borrowers throughout the mortgage process. Without the mortgage broker, competition amongst lenders will diminish. Mortgage brokers have the ability to shop for the best rates and products at a variety of mortgage lenders. This allows individual borrowers to obtain access to a wide array of products and rates. It also creates competition between lenders that benefits borrowers through lower rates and better products. The many benefits that brokers provide to borrowers help to ensure their continued relevance in the competitive mortgage industry.
►Appraisal issues will continue to negatively impact property values and the mortgage/housing market: It has become much more difficult for those attempting to sell or refinance a home to get an appraised value that allows them to qualify for a mortgage. This development is impacting borrowers’ abilities to purchase or refinance homes, and is slowing the stabilization of the housing market. The problem stems from a lack of comparable home sales due to the slowing real estate market, as well as a significant increase in the number of distressed properties selling at a sharp discount. This is an extremely important situation to monitor, especially in light of the large shadow inventory that are expected to hit the market over the next few years and the large number of foreclosures that were pushed into 2011 due to the robo-signing scandal.
►The rigorous licensing process could create a shortage of loan officers and increase demand for quality loan officers with experience and transferable relationships: Following the collapse of the housing bubble, new regulations were enacted to ensure that loan originators met certain minimum educational standards. The Secure and Fair Enforcement Mortgage Licensing Act (SAFE Act) imposes costly and extensive educational and testing requirements on loan officers. These requirements create a significant barrier to entry for those who wish to become loan originators. As a result, there could be a shortage of experienced, licensed loan originators. Those who are licensed and have transferable skills and relationships will find themselves in high demand in 2011.
►Private investors will continue to be reluctant to invest in the jumbo mortgage market: The economics of jumbo securitization and new capital reserve requirements makes issuing jumbo mortgage backed securities a risky proposition. Many of the lenders who are funding jumbo loans are portfolio investors, and very few lenders have the capital and wherewithal to hold portfolio jumbo loans.
►Borrowers will significantly increase their use of the online mortgage process—from research to closing: A recent Lending Tree survey found that 21 percent of consumers shop for mortgages online. Only a few years ago, the percentage of potential borrowers that shopped online for a mortgage was negligible. Going forward, one of the driving forces for online mortgage shopping will be younger, first time home buyers, especially as Gen X and Gen Y consumers who have grown up with computers look to become homeowners. In addition, as electronic commerce becomes even more commonplace the number of borrowers using the online mortgage process will grow.
John Walsh is president of Total Mortgage Services. Total Mortgage Services, provider of some of the lowest current mortgage rates, is an industry leading direct mortgage lender and mortgage broker and has funded over $6 billion in mortgage loans since 1997. Total Mortgage was included in the Inc. Magazines' list of America's Fastest Growing companies in 2010 and holds Better Business Bureau “A” ranking since 1997. Licensed in 21 states, Total Mortgage offers a variety of products and programs including fixed-rate loans, adjustable-rate mortgage loans (ARMs), jumbo loans, FHA mortgages and more. In 2010, Total Mortgage launched its wholesale lending platform TMS Funding. For more information, visit www.totalmortgage.com.