HOW THE MORTGAGE INDUSTRY BEATS THE MARKET

Since the election, interest rates have rose and housing inventory remains low. Home affordability remains at an eight year low. And with rising rates and home prices, fewer and fewer can qualify for a home mortgage. Business is down.

 Fannie Mae is forecasting a drop of 20% in origination volume, with a drop in the refi mix of business from about 50% last year to just north of 30% this year. Likewise, Freddie Mac is forecasting a 25% drop in the overall market.

 The mortgage industry isn’t one to just ride things out. Remember, we are talking about falling profits for banks, Wall Street, and the Federal Government (i.e. Fannie & Freddie). And the industry with the help of the government is working diligently to put more people into homes; one way or another.

1.    Financial Choice Act: Bill to deregulate lending.

2.    Expanded lending guidelines allowing lower down payments and higher debt to income ratios for lower income and distressed credit borrowers.

3.    Influx of Non-QM (subprime) lenders offering limited documentation loans.

4.    Day 1 Certainty: Fannie Mae’s automated income/asset verification to speed the lending process.

5.    Property inspection waivers (Fannie Mae) eliminating the need for an appraisal.

6.    Down Payment Assistance programs: Gifts and/or grants eliminating the need for a home buyer to put any money down on a home purchase. No more “skin in the game.”

7.    Push to target the Hispanic communities which are projected to make up more than 50% of the home owners in 10 years.

8.    Spreading US mortgage risk internationally.

 The industry is innovating at a rapid pace to boost profits. Or as the politicians will sell it, to provide the American Dream to all. But maybe, just maybe “all” shouldn’t qualify for the American Dream, at least not until they can prove they are more responsible than the banks, and the government.