MReport August 2022

TheMReport — News and strategies for the evolving mortgage marketplace.

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62 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT Fannie Mae Survey: Lenders Tightening Budgets Doug Duncan, SVP and Chief Economist at Fannie Mae, comments on the most recent Mortgage Lender Sentiment Survey, which found that major lenders are working on cutting costs amid a tumultuous real estate market. A s inflation rises, more families and businesses are tightening their budgets and taking cost-cutting measures to create a little more breathing room—and according to the latest survey, this includes mortgage lenders. Continuing a quarterly survey of mortgage executives that initially started in 2014, Fannie Mae has published its latest Mortgage Lender Sentiment Survey (MLSS) for the second quarter of 2022 finding that lenders are cutting costs as origina- tions dry up due to general afford- ability and interest rate constraints. This quarter's survey was completed by 210 senior lending executives in May 2022 represent- ing 189 lending institutions. All-in-all the survey found that 20% of respondents cited cost cutting as their most important priority currently, and 19% cited it as their second most important priority for a grand total of 39%. These numbers are up from 3% and 9% respectively from last quarter. Rounding out lenders top three priorities are talent management and leadership (37%) and business process streamlining (34%). So where are lenders making these cuts? The top three areas where cuts are being made were to back-office staff (71%), general and administrative expenses (66%), and loan officers (19%). "In 2021, the mortgage industry experienced significant growth, as loan originations reached a record high. So far, 2022 has presented a number of new challenges for lenders to navigate, including continued significant home price appreciation, rapidly rising interest rates, persistent inflation, and a slowdown of global economic growth," wrote Douglas Duncan, SVP and Chief Economist at Fannie Mae in a blog post. Consensus opinion among mort- gage executive has both purchase and refinance origination activity declining meaningfully this year." This marks the first-time lenders have prioritized cost cutting mea- sures since 2017. "For the third consecutive year, a majority of respondents cited 'online direct-to-consumer lenders' as their biggest expected competi- tor over the next five years, with many pointing to what they believe to be those companies' advantages, including lower costs, stream- lined mortgage processes, and advanced analytical and marketing capabilities," Duncan continued. "Additionally, compared to last year, in 2022 lenders were more likely to view traditional banks as their top competitor. Many lenders commented that traditional banks have advantages in accessing capital, offering lower rates, and cultivating relationships with customers. "Overall, mortgage lenders appear to be adapting their business priori- ties to meet what they believe are a new set of challenges. In an envi- ronment with weakened mortgage demand and rising rates, lenders told us that operational efficiency, strong customer relationships, and the ability to offer lower rates have become critical," Duncan concluded. "Earlier in the year, some firms in the mortgage industry announced layoffs and mortgage business closures, as the sales of both existing homes and new homes fell." "Moreover, loan origination prof- itability has fallen substantially this year, as the average production cost per loan has risen to a new high. With costs increasing and origina- tion volumes contracting, lenders' continued investment in business process streamlining will likely be critical to enhancing productivity in today's challenging, low-margin environment." House Passes Measure to Modernize Remote Online Notarizations Bipartisan House legislation seeks to modernize the notarization process and will allow individuals stationed outside of the U.S. to notarize documents securely. T he U.S. House of Rep- resentatives has passed bipartisan legislation, HR 3962—the Securing and Enabling Commerce Using Remote Electronic (SECURE) Notarization Act, by a vote of 336-90. Led by Reps. Madeleine Dean and Kelly Armstrong, the bill will update and modernize the notarization process in and outside of the United States. The Act aims to allow every notary in the United States to perform Remote Online Notarizations (RONs), as well as allow signers located outside of the United States to securely notarize documents. Passage of the measure would allow for the immediate nationwide use of RON and allow those stationed, like military personnel, outside of the United States, to securely notarize documents. "The pandemic has shown us how crucial online access is for so many areas of our life, includ- ing notarization," Rep. Dean said. "The SECURE Notarization Act will update our notarization process so that people across our country, and those living outside of the U.S. for military service or other reasons, can have their documents notarized remotely. I look forward to our com- monsense, bipartisan bill being brought to the Senate." Reps. Dean and Armstrong were joined by 31 of their col- leagues in introducing this legisla- tion, which has 125 co-sponsors. "Remote online notarization of- fers consumers a convenient way to safely and securely complete documents," Rep. Armstrong added. "Our bipartisan bill will permit nationwide use of remote online notarization, increasing ac- cess to this important process." HR 3962 next moves on to the Senate, where Sens. Kevin Cramer and Mark Warner have companion legislation, S. 1625— Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2021. According to the National Notary Association (NNA), 46 states passed laws or temporary rules that allowed notarial acts to be completed remotely due to the COVID-19 pandemic. In many states, the governor issued executive orders or emergency proclamations allowing for RON because of the pandemic. "MBA is grateful the House has passed this legislation that cre- ates federal minimum standards to allow notaries in all states to perform safe and effective RON transactions, making the mortgage closing process more convenient for all consumers—including our nation's military families," said Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, CMB. "Importantly, the bill's minimum standards for RON are consistent with both the MBA-ALTA model state RON bill and the Mortgage Industry Standards Maintenance Organization (MISMO) RON standards and would complement existing state laws by providing states with the flexibility and freedom to implement their own RON standards."

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