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Mortgage Originations: The Good, The Bad, And the Ugly in 2014

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Th e M Rep o RT | 15 cover story T he U.S. market for originations remains the ugly stepchild of the mortgage industry as it constantly faces the uncertainty of future growth, while simultaneously experiencing stalls and starts during certain parts of the year. The beginning of 2014 stunned mortgage professionals, leaving them hanging on the housing vine, so to speak, as interest rates hovered below 5 percent, consumers stayed on the side- lines, and the influence of new mortgage regulations stymied robust growth. "First quarter was univer- sally painful for everyone in the originations business," explained Brian Voss, EVP of Mortgage Network, Inc. And Voss is not alone in that assessment. Most of the industry described Q1 as a comedy of errors defined by bad weather and economic uncertainty, both of which dampened demand for purchase mortgages and refinancing products at a time when regulations continued to pinch loan processing speeds and demand. "The new regulations had some impact on the first-quarter slowdown, no doubt, but as lenders find their comfort zone, that will begin to fade," said David Williams, VP at RightStart Mortgage, "We're already seeing a certain comfort level in the new regulations, and this will only improve as the year continues." "That said, credit has tight- ened, and some applicants on the bubble, so to speak, may not be able to qualify for a mortgage they would have easily gotten under less scrutiny," he added. Rick Hogle, chief strategic of- ficer of Supreme Lending, shared a similar experience, saying, "Perhaps 20 percent of the slow- down can be attributed to QM and regulations. At this point, everyone seems to have been able to comply with the new rules, granted it added time and cost." But even with a slow start to the year, the second quarter of 2014 offered some signs of reprieve, and it seems the mort- gage industry is latching onto every silver lining that it can find, all the while keeping fingers crossed for a stronger second half. No Refinance Rebound R efinance originations dropped in the first half but fell back to historic norms, representing approximately 20 percent of originations, said Voss with Mortgage Network. Williams lauded second-quar- ter improvements overall. "[T]his situation is improving as lenders grow accustomed to the new environment. Also, I do regard weather as a factor in the first-quarter slowdown. Not only did we see snow in the colder states (and droughts in the warmer states), but the snow took place nearly every weekend, which kept homebuyers inside and unable to look at houses," Williams added. Williams' cautious optimism is not unwarranted. The second quarter of 2014 delivered a few doses of good news as the Mortgage Bankers Association reported improvements in credit availability for the months of May and June. Not to mention, a declining unemployment rate— with the nation's unemployment rate reaching its lowest level of

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