How’s the 2017 aged mortgage lead market shaping up? It’s starting to look like it might be a good one. Signs are beginning to point to a more competitive mortgage market — potential Trump administration policies, big banks eyeing the market again, economic indicators up. It’s potentially a perfect storm for some perfectly good deals for savvy sales agents. Here are four reasons now might be a good time to invest in a new batch of aged mortgage leads.
1. Deregulation on the Horizon
For the last eight years, the market has been characterized by two things: the financial crisis and ever-tightening regulations. With the CFPB coming into formation and beginning its watchdog role, no one was thinking about deregulation.
In fact, the big banks mostly thought about their liabilities and they retreated from the mortgage market. The Washington Post points out that in 2011, 50% of mortgage lending was handled by JPMorgan Chase, Bank of America, and Wells Fargo. But that 50% share has dropped to only 21% of the market. Meanwhile, nonbank lenders like Quicken Loans, loanDepot, PHH, and others, increased their market share threefold.
But Trump ran on a platform of rolling back “burdensome” regulations and many think he’s going to follow through. Says the Post:
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Rising interest rates and anticipated deregulation under the Trump administration could change the mortgage-lending business again and impact the volume of loans.
“We’re likely to see more banks come back into the mortgage market as interest rates rise, because there’s more profit to be made,” [Wharton School professor Susan] Wachter says. “But demand will be down because fewer people will refinance and because affordability issues will mean that first-time buyers are still missing from the market.”
2. More Credit Availability
One of the first beneficiaries of deregulation could be those mortgage customers with less-than-perfect profiles. The Obama-era regulation had put a lot of pressure on banks — stress tests, higher capital requirements, regulatory judgements, and being forced to take back loans that were deemed flawed.
Those policies weren’t good for big bank’s business, but they were worse for buyers who didn’t fit perfectly in the approval box. The result was less credit for mortgage applicants.
But things are changing. More banks could be coming back to the market, thanks to healthier interest rates, meaning more profit. Current 30-year fixed rate mortgages are averaging 4.27% APR, considerably higher than 2016 rates.
And this increased profitability could cause banks and nonbanks to compete for purchase loans, which means more access to credit. Says the Post:
In particular, [mortgage processing services and risk analytics expert Jeffrey] Taylor anticipates the use of different metrics to evaluate borrowers rather than focusing tightly on FICO scores as lenders do now. “There are already opportunities to make smart decisions based on other data, such as Fannie Mae’s Day 1 Certainty program that uses independent tools to validate a borrower’s income, assets and employment and make it simpler and faster for lenders to approve loans,” Taylor says. “The ultimate winner will be customers, because the more clarity a lender has on what it takes to get a loan, the less risk the lender has to take.”
3. Mortgage Market Expansion
Thanks to deregulation and looser credit, the mortgage market could see more expansion in 2017. Primarily that expansion could come from national and regional banks returning to the mortgage market, but not entirely. Per CNBC, even nonbank lenders are sounding optimistic:
“I think it will benefit us because what I think it’s going to do is provide a higher level of volume, so I think industry growth overall is going to be good for the industry and for the consumer,” said Anthony Hsieh, CEO of loanDepot, a nonbank lender. “We are prepared for any direction that the new administration would want to take, but certainly I think providing more available credit to the country really is a good direction.”
4. The Economy
Another ingredient to a competitive mortgage market: the economy. The January jobs report showed 227,000 jobs added, up from 157,000 in December, and consumer confidence was reported in January to be at a 15-year high. If the new administration follows through on plans to cut taxes and increase spending on infrastructure, it could lead to positive impacts on the mortgage market.
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All told, it’s shaping up to be a good year for aged mortgage leads. There are lots of deals to be had for agents who make the most of these conditions and the opportunity taking shape. If you’re in the aged mortgage business, definitely keep your eye on these economic indicators. It could be a very good year.
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