Skip to main content

New Report Predicts Diminished Mortgage Lending Volumes Next Year

Nov 28, 2016
Will the Federal Housing Finance Agency's (FHFA) decision to raise conforming loan limits for the first time in a decade help to boost mortgage lending volume in 2017

Will the Federal Housing Finance Agency's (FHFA) decision to raise conforming loan limits for the first time in a decade help to boost mortgage lending volume in 2017? A new data analysis from Kroll Bond Rating Agency (KBRA) titled “Declining Mortgage Lending Volumes Ahead” suggests that this will not be the case.

“Indeed, while 2016 has been an excellent year for the U.S. mortgage industry with almost $2 trillion in new loan originations, we believe that this year is also likely to be the peak in terms of lending volumes for years to come,” said the KBRA report, citing three key considerations to justify its pessimism. “First, the change in the conforming loan limit is insignificant compared with the double-digit home price appreciation seen over the past decade, especially in high priced markets such as East and West coasts and South Florida. Affordability is an issue in all of these markets. Second, the impact of rising interest rates and widening credit spreads is a far larger negative influence on prospective mortgage origination volumes than the relatively small increase in the conforming loan limit. Mortgage lending volume is about interest rates first and foremost. Third, the negative regulatory environment and low (or zero) risk adjusted returns in the residential mortgage sector will likely encourage the continued exodus of insured depository institutions from the one to four family loan market, reducing overall mortgage lending capacity.”

KBRA also noted that historically low interest rates coupled with today’s regulatory regime and evaporation in the refinance market will add up diminished mortgage lending by both banks and nonbanks in 2017 and beyond, with no easy fix in sight.

“Acquiring purchase mortgage customers is a more complex and expensive process than refinancing an existing mortgage,” KBRA added. This is especially true for risk-averse depositories that must deal with both the Consumer Financial Protection Bureau and prudential regulators who are actively discouraging below-prime residential lending and loan servicing by banks.”

About the author
Published
Nov 28, 2016
Co-Founder Mat Grella Terminated From NEXA

NEXA CEO Kortas states negotiations regarding the buyout will continue.

Mar 27, 2024
Comings And Goings At AmeriHome

Chief Operating Officer John Hedlund announced his retirement on Thursday in a LinkedIn post.

Mar 22, 2024
Rocket's Tim Birkmeier To Retire

Birkmeier is bidding farewell after a 28-year career at Rocket Companies.

Mar 21, 2024
How NAR’s Settlement Impacts Homebuying

While the settlement's silver lining is that homes are expected to become more affordable, many uncertainties loom over the housing market.

Mar 19, 2024
NAR Reaches $418 Million Settlement

The association agreed to give home sellers the option of compensating agents.

Mar 15, 2024
U.S. Non-Bank Mortgage Lenders Surge Amid Industry Consolidation, Fitch Ratings Reports

As smaller players exit the market, scaled originators like UWM and PennyMac Financial dominate, but challenges persist with low origination volume and pressured margins amidst rising interest rates.

Mar 14, 2024