TheMReport — News and strategies for the evolving mortgage marketplace.
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16 | M R EP O RT COVER STORY A s we approach the end of 2022 and the dawn of a new year, the mortgage and housing industries are facing several headwinds. The refi boom of the last few years has dwindled in the face of repeated Fed interest rate hikes designed to combat runaway inflation (as of this writing, the Fed has just announced another 75-basis-point hike, the sixth of the year). That one-two punch also has many potential homebuyers re- considering a mortgage or, at min- imum, waiting for home prices to drop further to help account for the higher mortgage rates they're currently facing. Following the Fed's latest hike announcement, Michele Raneri, VP of U.S. Research and Consulting at TransUnion, noted that "In the mortgage market, consumers who may otherwise be considering buying a home may choose to continue to hold onto their down payments, waiting to see if interest rates and/or home prices decline in the not-too-dis- tant future. For those consumers who do purchase a home, adjust- able-rate mortgages may contin- ue to be more popular among consumers seeking lower monthly payments in the short term." For some companies, decreased volumes mean tightened budgets or reductions in staffing, with several prominent lenders having announced layoffs in recent months. A late-October blog post from Fannie Mae SVP and Chief Economist Doug Duncan noted that the GSE's recent surveys of mortgage lenders found com- panies reporting that back-end operations staff is the top driver of current cost impacts when it comes to originating loans, followed by compliance/legal costs and loan officers. On the other end of the spectrum, back-end process technology and consum- er-facing tech were cited as the top drivers of cost reductions. The industry, it seems, is in another moment of transition. With that in mind, MReport re- cently spoke with a cross-section of mortgage industry lending and vendor executives to learn what victories they're hailing from 2022, what challenges they're rising to meet in the new year, and how these moments of transition can also prove to be moments of opportunity. Nathan Bossers, President, Boston National Title One of the topics your company is navigating right now is educating about the risks to lenders and servicers if attorney opinion letters end up replacing title insurance. Could you unpack that for me? S ure, there are a lot of different risks, and I think it's up to each lender to evaluate them indi- vidually, based on both their orig- inating strategy and their servicing strategy. The coverage gaps are very wide—what a lender's policy will cover versus what an attorney title opinion letter will cover. There are also many, many differences in how the coverage works. On the servicing side, and particularly on the investing side, Fannie and Freddie have come out and said, "We'll accept attorney title opinions in certain circumstances." They haven't been very specific about what those circumstances are. So, you're not guaranteed. There's always buy- back risk from them. Bankers are also concerned about the secondary market implications. They worry that, "Even if I accept attorney title opinions and I leave related assets on my balance sheet today, three, five, eight years from now, what if I want to sell those loans and the investors I want to sell to don't want them?" The lender's and owner's policies are typically paid for by the consumer at the time of the closing. If consumers opt for an attorney opinion letter, they don't have to purchase an accompa- nying lender's policy. And so, if banks want to sell one of those loans immediately and want to protect it with a lender's policy, they have to buy the policy out of pocket. It's a risk that they have to evaluate. Then there's the risk of, "I can't get claims paid, I don't have the defense that I get from a lender's policy from the title underwriter." With Great Challenges Come Great Opportunities With inflation and mortgage rates rising to challenge the industry, MReport speaks to a cross-section of mortgage industry executives about why now is the time to rise to the occasion with innovation and efficiency. By David Wharton