The Mortgage Lenders Lifeline for 2024 - Improved Economy, Fed Rate Cut and Loan Servicers

In a move that will directly affect mortgage rates, the Federal Open Market Committee (FOMC) decided to leave the federal funds rate untouched after its last meeting of 2023. This, coupled with the updated economic projections, signals that mortgage rates will ease in 2024 and, therefore, the industry might be moving towards providing affordability relief to homebuyers.

The recent data released by the Mortgage Bankers Association’s data on refinance activity also spells hope for an improving mortgage market. The report says that refinance volumes, which have started picking up because of the Fed’s three back-to-back rate hike-pause, are all set to see a significant jump in 2024 if the anticipated rate cut comes into effect.

In lockstep with this, loan originations are also expected to witness a steep jump due to the rate cut. This is because prospective home buyers, split between holding out and waiting for better pricing, will take the final plunge. Other contributing factors could be wage growth and more millennials entering their prime home-buying years.

Yet another key development of 2023, which is likely to feature prominently in 2024, is the rise in maturities of four to five-year vintage loans and the need for extensions. Over 60 percent of maturing loans are expected to seek extensions from six to eighteen months.

Further, foreclosure activity has been going up in 2023. While this trend may not increase further in 2024, filings will continue. Next year, distressed loans can be anywhere between 12 to 20 percent. Consequently, lenders will have to negotiate hard to recover more. This may trigger the need for loan restructuring or modification and other loss mitigation options.

It’s Back to Loan Servicers

Therefore, come 2024, lenders will have a lot of work on their plates. As a result, there will be an increased reliance on loan servicers to carry out portfolio assessments and spot issues. This will help lenders better understand what problems may arise and how they can be nipped. In the worst cases, lenders will seek their help to restructure the loan.

Loan servicers, as usual, will be sought after in 2024. Over the years, they have helped lenders create a great servicing experience for their clients. Also, their experience in adapting their services to the varying needs of the industry - having worked with a wide spectrum of lenders, loan types, and market conditions - will enable lenders to enter negotiations for better outcomes with greater confidence and faster.

Note: This article is brought to you by Invensis, a mortgage loan processing outsourcing company with 22 years of experience in supporting mortgage lenders and credit unions based in the US.