TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/106030
feature down payments on entry-level buyers—builders will likely start feeling the effects. Another concern for housing and mortgage industry professionals is the nebulous "qualified mortgage" (QM) rule, which establishes the type of loan for which a lender is legally protected from future lawsuits. The ambiguity of the term has remained a point of debate for analysts, industry experts, and politicians, but Barclays believes a clarification is on the way very soon. According to Kim and Coyle, the Consumer Financial Protection Bureau's decision on QM is absolutely critical to housing and the economy, as the current environment has prompted many banks, particularly smaller institutions, to err on the side of caution, creating a restrictive credit market. "To be sure, the mortgage policy decisions facing regulators are far from being resolved, but we now believe that investors have essentially come up the learning curve on these issues," wrote Barclays' analysts, echoing the FHA's sentiments. "Going forward, we think mortgage policy issues will pose a more modest threat and that clarification on these issues during the year could provide incremental upside to the stocks." Barclays concluded its commentary regarding housing and S e c on da r y M a r k e t a na ly t ic s se r v ic i ng or ig i nat ion ANALYTICS Don't Look Down While some in the mortgage industry are making reserved improvements to annual expectations, one East Coast-based lender is taking a different, decidedly negative view of the marketplace's next 12 months. W ith the arrival of a new year, mortgage and housing leaders are focused on gaining insight into what lies ahead in the marketplace. And according to at least one non-bank lender, recent upward adjustments to annual projections observed throughout the industry are premature. 64 | The M Report What is Total Mortgage Services LLC anticipating in 2013? A definitively dubious combination of declining originations, rising interest rates, and fewer mortgage professionals. The Connecticut-based lender believes that residential mortgage origination volume will decline 24 percent this year, largely driven by significant declines in refinances. While Total Mortgage foresees purchase originations rising by about 16 percent this year, the company's analysts also expect sharp declines in refinancing, which will more than offset other areas of growth. In addition, interest rates that continue to hover near record lows will soon become a thing of the past, according to Total the economy on a lighter note, choosing to maintain its "positive" outlook for homebuilding and building products. While the organization's evaluation isn't necessarily indicative of sunny skies ahead, it represents a welcome improvement over the severity of forecasts seen prior to the government's fiscal cliff deal, and the industry can confidently anticipate modest benefits now that the nation's economic storm has subsided. Mortgage Servicing. The company anticipates rates will begin rising by the second half of 2013. The lender expects strengthening in the overall economy will contribute to higher interest rates. "Rising employment and wages, while supporting the residential real estate market, will also help to push interest rates higher and cut refinance volume significantly," the company stated. Changes in the mortgage market landscape this year "will present mortgage lenders with a new set of challenges," said John Walsh, president of Total Mortgage Services. "This new set of challenges will require adaptation by lenders that wish to survive in the new lending environment," he added. As refinances decline and purchases rise, originators will have to adapt. Total Mortgage Services suggested the "vast majority of mortgage originators are wholly unprepared" for this change. However, not all originators will adapt, according to the company, and not all will need to. The company anticipates a 30 to 35 percent decline in employment in the originations sector this year. While a decline may be warranted this year, "the most likely victims of the industry's reduction in force [will be] younger, less experienced workers." This trend will lead to a whole new obstacle for the industry: "the graying of the mortgage industry," Total Mortgage Services said.