TheMReport — News and strategies for the evolving mortgage marketplace.
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22 | M R EP O RT FEATURE FEATURE Shift to a Purchase Market W hile the past two years have been all about refi- nancing, the MBA believes that is about to change. This year is expected to be an active one for homebuyers, with purchase mortgage origina- tions projected to increase by 8.5% to a record $1.54 trillion. 2020 ended up around $3.57 trillion in total originations. This year, that number is expected to fall to $2.75 trillion, including refinances, with purchase volume accounting for the bulk of that number. However, despite this decrease, the expected total volume in 2021 would still be the second-highest figure in the past 15 years. More Regulations & Stricter Enforcement A Biden presidency more than likely means more regula- tions, including a more active CFPB and a big question mark around the future of the GSEs. But what President Biden can achieve during his term largely depends on Congress' willing- ness to compromise with a new administration. Biden has stated many times how he intends to use the federal government's strength to advance affordable housing initiatives, and he may use Fannie Mae and Freddie Mac to make affordable housing more robust. Biden has already selected a new leader for the CFPB and may reintroduce stronger regula- tory oversight. It is also gener- ally believed a Biden administra- tion would keep the GSEs under conservatorship, at least for the short term. However, after the pandemic is over, they could be released as regulated utilities. Millennial Renters A ccording to LendingTree, millennial homeowners have a median credit score of 693, com- pared to a median credit score of 601 for renters, which stands to reason considering those with higher credit scores are more suc- cessful at qualifying for loans and purchasing homes. But as the industry shifts to a purchase market, how are you going to help credit challenged millennials who want to move from renting to owning but whose credit scores fall a little short? Scoring tools that help appli- cants with their financial health will be necessary, educating bor- rowers on managing their credit. Scoring tools come in various shapes and sizes—some update credit information with the national repositories by forward- ing borrower-supplied documents directly to the three bureaus. The repositories then update credit information and trade lines on the borrowers' credit reports. There are also automatically generated credit report cover pages that provide an instant snapshot of an applicant's creditworthiness. Additionally, credit score analysis tools are available that make it easier for borrowers to reach their target credit scores by providing a detailed review of the consumer's credit score. Some even allow you to simulate changes to the con- sumer's credit file and predict the score that may result from those changes. Another scoring tool automatically scans credit files to alert lenders to opportunities you might have overlooked and provide potential score improve- ment values. There's even a credit score consulting service that offers applicants the highest probability of a successful rescore by deliver- ing customized solutions that truly work. Applicants can target an increase of 5 to 105 points—or a specific product, lender, or rate tier. No matter what scoring tools you ultimately choose to use, you can position yourself to succeed in the emerging purchase market by offering millennials a chance to improve their credit score. Pandemic Fraud Schemes T hose who commit fraud often try to take advantage of new government programs created for emergencies, such as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). New account fraud, identity theft, cybersecurity risks, and im- poster and money mule schemes are all on the rise due to the ongoing pandemic. Tools that identify fraud and mitigate risk will be more criti- cal than ever. You will need to verify and reverify identities, employment, assets, and income throughout the mortgage process to catch invalid information. Look for a one-stop validation process that makes it easy to quickly verify data, perform a thorough risk assessment on applicants, and detect potential problems with ap- plications—before and after a loan closes. And make sure it is fully customizable so you can select the criteria that meets your needs and compliance requirements. As 2021 kicks off with a promise of an effective vaccine to combat COVID-19, businesses of all kinds will continue to struggle with the economic impact of the pandemic. And while the mortgage industry is not entirely immune to this impact, it is better positioned to perform well given the anticipated continuation of low rates and the technological strides made in 2020. Lenders who use the right tools to ensure quality, mitigate risk, edu- cate applicants, and properly verify data will be better positioned for success long after the pandemic subsides. . GREG HOLMES is President and CEO at Credit Plus, Inc., a third-party verifications company serving the mortgage industry. You can reach him at gholmes@creditplus.com. A Biden presidency more than likely means more regulations, including a more active CFPB and a big question mark around the future of the GSEs. But what President Biden can achieve during his term largely depends on Congress' willingness to compromise with a new administration.