A look at current mortgage issues for 2024 | ET REALITY


As we plan for a gradual cycle change in 2024, some hot-button issues are especially hot right now. What’s next in the fight against inflation and rates? How do we help homebuyers navigate affordability? And how should mortgage companies rethink technology strategy? Below, I discuss these hot-button topics and look forward to going deeper with other mortgage CEOs in a HousingWire webinar on December 5. Please reach out with your information so we can all prepare before 2024.

What’s next in the fight against inflation and mortgage rates?

He Mortgage Bankers Association predicts rates will end this year at 7.2%, and that looks realistic now.

Thanks to a pause in rate hikes and a moderate attitude fed statement on November 1, mortgage bonds rallied and rates fell from about 8% to 7.5%.

But when the Fed’s preferred core PCE inflation measure is 3.7% and its target is 2%, it means the fight against inflation is not over. Here’s what Federal Reserve Chairman Jerome Powell said in his Nov. 1 press conference: “Inflation has moderated since the middle of last year and the summer readings were quite favorable. But a few months of good data are just the beginning of what it will take to build confidence that inflation is falling sustainably toward our goal. The process to sustainably reduce inflation to 2% has a long way to go.”

How long?

Here are the MBA rate predictions for 2024 by quarter: 6.8% for the first quarter, 6.6% for the second quarter, 6.3% for the third quarter, and 6.1% for the fourth quarter.

How do we help homebuyers navigate affordability?

This means reducing inflation next year, and mortgage rates near 6% would help affordability problems caused by two things:

  1. The fight against inflation has driven up mortgage rates.
  2. Low inventory and a stable labor market have put a floor on home prices

The good news is that the GSEs remain committed to loan approval guidelines that help through these difficult cycles.

Media stories about housing affordability rarely cover how GSEs allow for low down payments and higher debt-to-income ratios. Media headlines make borrowers nervous, but lenders make loans.

And when lenders – not incumbents – explain cash to closing and total monthly costs relative to income, the lights come on for borrowers.

Can GSE’s flexible guidelines help homebuyers with current challenges in a systemically safe way?

I think so because total mortgage delinquencies in the United States – which includes conventional, FHA and VA loans – are still near historic lows of 3.37% per MBA.

Additionally, the value of housing in the United States is now $44.5 trillion per year. Urban Institute, and the total outstanding mortgages are $13.9 trillion per MBA. That implies that there is 68.7% equity in the American real estate system.

Originators and servicers must redouble their efforts to educate consumers and guide them through this cycle.

How should mortgage companies rethink technology strategy in 2024?

Mortgage technology is an important part of enabling this education, but in this period of scarcity, originators and servicers will continue to look at how to optimize their technology.

At their origins, lean shops have argued during this cycle that they need manufacturing loans (LOS, POS), pricing, marketing and everything else is expendable.

This implies continued consolidation of fintechs in mortgage origination in 2024.

A good example here is CoreLogic buy a POS this year and combine it with its automated underwriting and pricing capabilities. This makes POS more relevant as a loan origination tool, giving loan officers and underwriters a more complete profile of the borrower and property at an earlier stage in the process.

In terms of services, the essential capabilities are more complete: basic services, consumption, default and loan movement (incorporation, transfers, etc.).

And there are two things these systems must do to ensure that administrators can educate and engage consumers affordably:

  1. Provide a single user experience (UX) and share data so that all users (consumers, service providers, investors, regulators) see the same things across the system in real time.
  2. Run on a cloud-native, open API ecosystem, giving service providers operational flexibility to manage easy and cost-effective integrations.

A good example here is sagentwhich will begin to demonstrate these capabilities after we move into 2024. We can’t wait to show you.

This is what creates a world-class experience for consumers when they need it most.

And throughout this cycle, Sagent is the only fintech player that makes large investments in this future, when servicers need it most.

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