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12 | M R EP O RT COVER STORY F ollowing record business levels of 2021, mortgage lenders expect the new year to continue from a position of strength. However, there are challenges on the horizon, ranging from slightly elevated interest rates to a more stringent regulatory environment. As we enter the waning days of 2021, MReport spoke with executives from Cherry Creek Mortgage, Churchill Mortgage, Homespire Mortgage, and more about critical takeaways from the past year, as well as what to expect from the lending landscape in 2022. With low interest rates, increas- ing home prices, and a strong economy, the last 12 months were excellent for the mortgage indus- try and residential real estate, industry experts agree. "The mortgage industry was surprisingly strong in 2021; there were a lot of headwinds coming out of 2020 that carried through into 2021," said Matt Clarke, COO, Churchill Mortgage. "Even with a significant inventory issue, volumes for originators still grew nicely, and refis continued on a steady pace." Though the incoming busi- ness was excellent, there were still challenges, said Pete Butler, Executive Managing Director, CXO for Wipro Mortgage Digital Operations/Platforms and Wipro Opus. "Because it was so busy, it also caused some problems for a number of companies. The avail- ability of processing and under- writing talent was really tight." Automated underwriting can only go so far to fill this gap, Butler said. As a result, mortgage lenders had to pay premiums for this talent, driving up the cost of doing business. The year started much like the end of 2020, said Allen Jingst, Chief Revenue Officer for LenderClose. Interest rates remained at or near historic lows, prompting refinances as well as enabling many to buy their first homes. While some of those who refi- nanced used the additional cash to consolidate debt or to purchase something special, others used the money to rehab their residences rather than buy a more expensive move-up property as home prices continued to rise, Jingst said. "We never had a period where the purchase market slowed down," said Brian Koss, EVP and Head of Production for Mortgage Network, Inc. However, he noted that "it wasn't as insane as 2020, when there was a lot of panic buying." It's the American Dream … But Can We Afford It? T he affordability of housing, particularly for first-time homebuyers, became increasingly out of reach for many as home prices continued to accelerate throughout 2021. According to the National Association of Homebuilders (NHAB) report in mid-November: Housing affordability held steady at its lowest level in nearly a decade, as higher home prices offset lower mortgage rates to keep the affordability rate flat in the third quarter of 2021. However, ongoing supply-chain disruptions and the prospect of higher interest rates in the future threaten to exacerbate affordability problems in the months ahead. And according to the NAHB/ Wells Fargo Housing Opportunity Index (HOI): A little more than half (56.6%) of new and existing homes sold between the beginning of July and end of September were af- fordable to families earning the U.S. median income of $79,900. This is unchanged from the per- centage of affordable homes sold in the second quarter of 2021 and remains the lowest affordability level since the beginning of the revised series in the first quarter of 2012. In a press release at the time of that report, NAHB Chairman Chuck Fowke said, "Persistent building material supply chain bottlenecks and tariffs on Canadian lumber and Chinese steel and aluminum continue to place upward pressure on con- struction costs and home prices. Policymakers must fix supply chain vulnerabilities that are disrupting and delaying construc- tion projects and hurting housing affordability." Housing prices also rose much faster in some areas of the coun- try, such as Denver, Colorado, and many cities in California—the latter which are now the least af- fordable, according to NAHB. "We are starting to see that level off a little," said Rick Seehausen, President and COO, Cherry Creek Mortgage. Up, Up, and Away? Will 2022 prove to be a banner year for mortgage? Experts from Cherry Creek, Churchill, Homespire, and more forecast the trends and challenges facing the industry as a new year dawns. By Phil Britt