MReport April 2021

TheMReport — News and strategies for the evolving mortgage marketplace.

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22 | M R EP O RT FEATURE T he COVID-19 pandemic, the recession, and the U.S. presidential election made 2020 an unusual year for the mortgage industry. With interest rates at record lows, refinancing carried the market, but that trend can't continue forever. The need for inventory is creating an imbalance with housing demand. In 2021, lenders will need motivated sellers to enter the market or loan volumes will plateau, ending a multi-year rise in mortgage markets. Much of that motivation may come from changes to mortgage lending best practices that were already underway in 2020. Fintech companies are driving an undeniable behavioral shift. The streamlining effect of encouraging institutions and consumers alike to adopt technology is changing the game, making the process more digitized, user-friendly, and efficient. At the same time, the pandemic has caused the rules of the game to change as well. It has led government entities like the Federal Housing Finance Agency (FHFA) to relax some mortgage origination rules to encourage digitization—for example, by allowing remote online notarization (RON) of mortgage documents. Together, the shift toward increasing tech adoption and loosening regulations will make the mortgage process faster, easier, and more accessible to more borrowers, giving the mortgage market the boost it needs in 2021. However, the size of that boost will depend on a few factors—most notably, the Biden administration's housing policies. Navigating an Unpredictable Environment H istorically, investors have gone to the sidelines when a new president enters office, caus- ing a slight dip in the markets, but stocks actually rallied on Inauguration Day this year. That could be a good sign for the mortgage market. However, it's hard to make that prediction with confidence due to uncertainty around the ongoing impact of the pandemic. Depending on how quickly and how widely a COVID-19 vaccine can be administered, companies will make different decisions about how and when to go back to work, which in turn will dic- tate the stability of major housing markets. While suburban markets have seen a surge in housing demand during the pandemic, big cities have seen a sharp decline as remote workers move further from their offices. Full vaccination would bring at least some of those workers back to the office, and therefore back to urban areas. However, the change won't happen overnight, especially as vaccine programs in many states have seen frustrating delays. It's also likely that remote work will continue for many people even after it's safe to work in close quarters again. Both of these fac- tors could drag out the housing market's rebound and throw more uncertainty about mortgage rates into the mix. The Impact of Housing Policy P resident Joe Biden's policy choices could influence outcomes, too. The president has signaled that affordable hous- ing policy will be a focus for his administration. In his short time in office, he's already extended foreclosure and eviction moratori- ums and asked the Department of Mortgage Lending Best Practices: How the Goalposts Are Shifting In 2021, lenders will need motivated sellers to enter the market or loan volumes will plateau, ending a multi-year rise in mortgage markets. By Sipho Simela

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