TheMReport

MReport December 2021

TheMReport — News and strategies for the evolving mortgage marketplace.

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16 | M R EP O RT COVER STORY 50%, with the origination market possibly seeing an increase of 10% to 15%. Koss mostly echoed those fig- ures, even though he also expects a drop-off in refis. Homeowners who haven't already done so will look to take advantage of their high equity levels in 2022, Koss said. "Our past borrowers have come back to us frequently for business, which means we get a lot of good, solid, repeat refi business." "It remains to be seen as we move into 2022 if the rapid home price appreciation will continue or if we will see a slight decline," Seehausen said. "I think interest rates will remain relatively low. Margins may contract a little bit, but certainly not to 2018 levels." "Companies that have not lost sight of the purchase market will do very well in 2022," Butler said. "If you focused too much on the refi market, you're going to be hurting." The new year will also bring a renewed push from lenders cur- rently offering non-qualifying mort- gages (non-QM), as well as some first-time entrants into the market, Butler predicted. "Certainly, it's higher risk, but not anything near where it was in 2008. With the number of people who have lost their jobs or have taken a hiatus for whatever reason, non-QM is going to have a larger role." Technology will continue to progress, and perhaps, so will some users' acceptance of digital capabilities. As of the end of 2021, several states still required "wet signatures" on loan documents, even though many government entities moved to acceptance of electronic signatures during the pandemic. With technology enabling many people to work remotely, Jingst expects people to continue moving away from high-cost areas to lower-cost areas since they can earn as much and afford that much more home. While the change in flood in- surance rates is unlikely to cause a great concern where the very affluent choose to live, the higher rates for the highest-risk proper- ties could push some people out of lower-lying areas in Louisiana, Houston, and other less-affluent areas with high flood risks, Seehausen noted. Innovation and Consolidation C larke told MReport that he anticipates the trend of merg- ers and acquisitions—something that has been a key part of the industry landscape in 2021—to continue into 2022. "A lot of the larger companies have done a good job taking building up reserves over the last couple of years," Clarke noted. "They've also become accustomed to enormous volumes. As volumes shrink, they're going to look for ways to feed this enormous beast that they've created. If they don't have a high level of refis, that means they're going to have to increase their purchase volume by acquiring other companies." Cherry Creek Mortgage added 26 branches in 2021, and expects more expansion in 2022, according to Seehausen. He also expects the company's consumer-direct business to continue to grow. "We expect the mortgage market to contract in 2022, which is why we are so focused on growing market share." "There will be more consolida- tion in the industry, which will create some acquisition opportu- nities," Seehausen said. "We are also looking for other financial services-related businesses in real estate and property and casualty insurance. We think there may be some M&A opportunities for diversification into those areas. I would expect us, and others like us, to benefit from that." Continuing the theme of "more with less," several areas of tech innovation may see increased realization of their potential in the new year, including robotic process automation (RPA) and artificial intelligence (AI). Sheinin anticipates these areas of tech will become "incredibly impactful" for the industry in 2022, particularly when it comes to purchase advice reconciliation, with the bots taking in the data in real time and reconciling it. Underwriting will likely also make more use of RPA and AI in 2022. However, Sheinin warns that mortgage lenders can sometimes fall into the trap of relying too much on RPA and other tech- nology solutions. "You have to be careful with it, you can't just jump on every little thing that comes along. You have to be care- ful that it fits with your business model and that it's going to get you the most bang for the buck." Depository institutions will be looking for ways to drive new loans in 2022, Jingst said. While depository institutions will still limit risk, he expects them to do a few creative things, such as playing closing costs, to generate additional loan volume. Despite being honest about the challenges the industry must tackle in 2022, the experts MReport spoke with remained generally optimistic about 2022, seeing those challenges as opportunities to grow and excel rather than insur- mountable obstacles. "We don't see anything that would really surprise us," Koss said. "We're expecting a drop of about 20%, but that's from a very high spot, so that makes us op- timistic. We're at a good place to start. We're really looking forward to 2022." PHIL BRITT started covering mortgages and other financial services matters for a suburban Chicago newspaper in the mid-1980s before joining Savings Institutions magazine in 1992. When the publication moved its offices to Washington, D.C., in 1993, he started his own editorial services room and continued to cover mortgages, other financial services subjects, and technology for a variety of websites and publications. "A lot of the larger companies have done a good job taking building up reserves over the last couple of years. They've also become accustomed to enormous volumes. As volumes shrink, they're going to look for ways to feed this enormous beast that they've created." —Matt Clarke, COO, Churchill Mortgage

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