What Will The New Year Bring The Mortgage Industry In 2022?

With the year rapidly coming to a close, many in the mortgage industry are asking what 2022 will bring.? Last weeks’ announcement by the Federal Reserve, suggests rates will begin to transition towards the end of March 2022 and see an upward trajectory for the remainder of the year.? Should this happen, rising rates will cause a downward current for originations.? In fact, the Mortgage Bankers Association is expecting originations to fall by at least $1 trillion in volume next year.? If this comes to fruition, a rightsizing of the industry will become inevitable as the presently expansive network of originators will be competing for a diminishing pool of business.?

Possible offsets to slow an ebbing tide of originations will include adjustable rate mortgages.? ARMs will see a resurgence and may very well become the go-to tool to keep payments down.? This will be especially true with hybrid products such as the 10/1 ARM, which provides a 10 year fixed period and a 1 year adjustable rate thereafter.? The success of these programs will be in the fine print.? Caps, margins and adjustment periods will all be important to determine proper fit for the borrowers needs based on individual circumstances.? The adjustment period after the 10 year fixed term elapses will also be in play.? Most lenders have switched to a 6 month adjustment term thereafter rather than the traditional 1 year adjustment period.?

Home equity lines of credit will also make a comeback.? Those looking for extra cash to improve their homes will be hesitant to refinance their current low fixed rate mortgage to ascertain equity in the home.? Shrinking margins will force lenders to seek ways to cut costs.? Lenders will evaluate and implement ways to leverage technology to gain efficiencies and manage expenditures.?

For me, the elephant in the room is housing inventory.? If inventory remains lesser than demand, values should continue to increase even if only marginally.? This would lead to growth in equity for homeowners which could very well continue to fuel the refinance arena.?

One thing is clear, currents going into 2022 will have mortgage loan officers evaluating every aspect of their organization.? This will include technology, execution & delivery, pricing and most important from my perspective, product mix.? Those offering portfolio lending platforms will have an advantage as loan officers working for these organizations can paint with a broader brush allowing them to accommodate a larger swath of business.?

Only time will tell what the new year will look like.? Bring on 2022!?