TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/409279
Th e M Rep o RT | 37 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SERVICING THE LATEST Business Outlook grim among mortgage Professionals The short-term housing outlook is less than positive. m any housing and mortgage industry professionals believe that the overall outlook for their business in the next six months is "grim," according to the Collingwood Group Mortgage Industry Outlook Report. The report was the first- ever such report published by the Collingwood Group. The Washington, D.C.-based advisory firm will be conducting a monthly survey of mortgage and housing industry professionals to report on the state of the business. Only 30 percent of mortgage industry professionals surveyed for the report believe that busi- ness conditions will be better in the next six months, while 41 percent said conditions will stay the same and 29 percent said they believe conditions will be worse. Fifty-nine percent of respondents said their current business conditions were worse in September than they were at the same time last year. Only 2 percent of respondents said they believe it is extremely likely that the housing market will improve in the next six months. One reason for the bleak outlook is the effect of regulation on the housing and mortgage industries, which has been in- creasing since 2010 and especially in the last year, forcing busi- nesses to devote more and more resources toward compliance, the Collingwood Group report said. "The implementation of the Consumer Financial Protection Bureau (CFPB) origination and servicing rules have exposed lenders to a host of new compli- ance demands and risks," the report said. "The challenges lend- ers are managing are exasperated by the increased level of federal, state, and local government en- forcement activities. The results of the survey suggest that this is having a strong impact on busi- nesses' bottom lines." Only 9 percent of respondents reported that the pace of regula- tion has had little or no effect on their business, while 19 percent said the pace of regulation has had an extreme impact. In all, 78 percent of housing and mortgage professionals surveyed said that increased regulation has hurt their business in some way. "The results of our first survey indicate a pretty grim outlook for the next six months," Collingwood Group Chairman Tim Rood said. "The fast pace of regulatory enforcement is a one- two punch for many lenders." The effect of increased regulation has spilled over into consumers. In many cases, consumers have been prevented from obtaining a mortgage loan, since the increased regulation has forced the industry in general to tighten credit availability. Seventy percent of survey respondents said they believe there is a high to extremely high correlation between regulation and the need to tighten mortgage credit. "Many lenders are torn be- tween making credit available to lower-credit-score borrowers and mitigating exposure to regulatory risk," said Brian Montgomery, Collingwood vice chairman and former acting HUD secretary and commissioner of the Federal Housing Administration. average mortgage loan age reaches all-time High Growth driven by borrowers with lower credit scores. m ortgage loans are aging, particularly loans to borrowers with lower credit scores, according to the latest data from Jacksonville, Florida-based Black Knight Financial Services. In fact, the average loan age is currently at an all-time high of 54 months, according to the firm. The average mortgage loan age has been on the rise for about nine years, although the uptick in loan originations last year brought on a "temporary slowdown," according to Black Knight. Loan age often varies by credit score, but Black Knight found the re- cent aging is most prominent among loans to borrowers with credit scores below 700. Loans to borrowers with credit scores of 750 or above have changed little over the past few years, while loans with lower credit scores "have seen dramatic increases in average age," said Kostya Gradushy, manager of research and analytics at Black Knight Financial Services. Some of the aging among lower- credit-score loans might stem from the fact that some lower-credit- score borrowers have improved their credit scores since their loans were originated. Black Knight pointed out that 9 percent of today's borrowers have credit scores below 719 but have higher scores today than when their loans were originated. It is also important to note that most recently originated loans have gone to borrowers with high credit scores. In fact, the "share of purchase originations with high credit scores is at an all-time high," according to Black Knight. This fact aligns with Gradushy's observation that 2012–2014 vintage loans have lower delinquen- cy rates than any vintages in the previous seven years. However, Gradushy also pointed out that "even among borrowers with lower credit scores, these vintages are outperforming all previous vintages."