The Rush to Purchase Mortgages May Turn Out to Be Premature


WE’RE HEARING a lot of lenders are optimistic about their prospects for increasing their production of purchase mortgages. Their optimism may not be justified, though.

In discussing their fourth quarter financial results, one publicly traded lender after another outlined their efforts to reach more prospective homebuyers and build out their pipelines over the months ahead.

But one has to ask if home sales will be able to match this optimism. 

We saw what happened last summer when interest rates jumped and buyers went back into their caves.

Federal Reserve tapering is a reality now and it will be difficult for marginal borrowers to juggle rising rates and the high fees or premiums that Fannie Mae, Freddie Mac and the Federal Housing Administration charge.

As the year progresses and competition heats up, will they ease up on their lending standards and take some risk to increase production? Will loan officers smile when they see a 660 credit score?

Now that Mel Watt is the new Federal Housing Finance Agency director, there is some chance Fannie and Freddie will begin to reduce their loan level price adjustment fees.

That tax on GSE homebuyers is no longer justifiable now that Fannie and Freddie are profitable and hold such large loan loss reserves. 

One can only hope that this year will see a return to a more normal mortgage market.

Meanwhile, reverse mortgage lenders are optimistic too. They believe reforms to the FHA Home Equity Conversion program that Congress passed last summer will be the turning point for their industry.

FHA is expected to release new guidelines in mid-February that will require reverse mortgage lenders to conduct financial assessments for the first time.

Initially, these financial assessments might reduce originations because seniors with limited income or financial resources will not qualify.

But the reverse mortgage industry expects the financial assessments will lead to more positive press coverage. And the retiring baby boomers will come to have a more favorable view of reverse mortgages.

COMMENT OF THE WEEK: We love getting thoughtful comments on our features, such as the recent one about the hard time surviving spouses are having with reverse mortgages if they are not yet 62 and their spouse with the home equity conversion mortgage (HECM) predeceases them. Reader Augie Zolezzi points out “The reverse mortgage when used properly is a very good tool. Both spouses need to be over 62 years old. If one is under that age there will always be a problem. Maybe an insurance policy as part of the package would work. If one dies the policy could pay the home off. Nothing is simple unless it is planned out. The reverse is just one tool.”

SHOUT OUT: Hiring trends in the mortgage business have been uniformly down over the past year or so. Still, not everyone is firing people. Some are expanding their businesses and hiring to take over open market share. A good example is Churchill Mortgage of Brentwood, Tenn., which has continued its hiring spree of 2013 into the first month of 2014. After recruiting more than 100 employees last year and opening several new branches across the nation, Churchill is kicking off the New Year by adding fifteen new employees in California, Georgia, Mississippi, Oregon, Tennessee and Texas.

BLOG OF THE WEEK: Karen Deis seems to have struck a nerve with her blog listing nine reasons people might want to consider leaving the mortgage business. This blog has been ranking high on the must-read list all week. Agree or not, ennui seems to be pretty high in the mortgage business right now. Many of her reasons are more about not having the right attitude for staying in mortgages, which is slightly different than reasons to leave outright, but you get the picture. The Jan. 10 onslaught of rules and regulations has a lot of people spooked.

MOST READ/E-MAILED CONTENT: Perfect segue from the last item. The most read content on our website for the week is Karen Deis’ blog on nine reasons to leave the mortgage business, as commented on above. The most emailed content is Brad Finkelstein’s feature on a potential bidding war for successful loan officers. Brad’s column awards top originators “free agent” status just as the big sports stars have. If volumes do contract as much as pundits are saying, an originator who can close business despite the dropoff will have a value above rubies.

SPEAKING OF LOAN OFFICERS: It is time for all mortgage originators to take part in our annual survey of top loan producers. So please go to this url and participate: As an incentive you will get a free subscription to Origination News! Everyone looks eagerly forward to this annual ranking which is a follow-on to the one formerly conducted by Mortgage Originator magazine. We took over the editorial features of the old MO during the Great Recession, a time that was unkind to both mortgage companies and media companies.

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