What a year of ups and downs it was for the mortgage industry. While most industry experts agree that 2013 was the year that the housing market finally got turned around – total home sales were up 10% compared to 2012, according to CoreLogic – others have serious doubts that the ‘recovery’ will last into 2014. They point to rising interest rates, increasing home prices, lackluster economic growth, and a slew of new federal and state regulations as factors that will slow, or perhaps even stall, market growth in 2014.
Also driving pessimism is implementation of the Consumer Financial Protection Bureau's (CFPB) new ability-to-repay/qualified mortgage (ATR/QM) rules going into effect Jan. 10 – which many lenders fear will lead to an over-tightening of credit and significant reduction in the number of qualified borrowers. If having to comply with this complex set of rules isn't enough, new layers of regulations loom on the horizon – in particular, the CFPB's new ‘Know Before You Owe’ rules and forms going into effect in August 2015.
So what do industry experts think were the most significant factors that reshaped the industry in 2013? And what factors do they think will reshape the industry in the coming year? To find out, MortgageOrb interviewed industry luminaries including Lisa Binkley, senior vice president, business development and mortgage solutions for Platinum Data Solutions. What follows are Binkley's responses to our questions:
Q: What do you think were the top three factors that reshaped the mortgage industry in 2013 and why?
Binkley: Dodd-Frank, the CFPB and the end of the refinance market were the three big game changers in 2013. These are the primary factors responsible for putting the industry in the thick of making some major adjustments. Right now, lenders are preparing for the regulatory changes to take effect this month, anticipating audits and qualified mortgages, and making adjustments to ensure they transition to the new purchase market – all this while the car is going down the road at 90 mph. Meaning, they've already got their hands full – they're moving full speed ahead, trying to build, grow or maintain their business.
The CFPB's new ATR rule was a significant part of the conversation. Everyone is waiting with bated breath to see how it is all going to be accepted – and audited – going forward. The year also brought purchases back to the table. We saw home values increase in several areas of the U.S., and in some areas, we watched multiple offers being given for properties. Adjusting to this purchase market isn't a small feat. It involves the entire organization, from top to bottom, in order to accommodate compressing timeframes and the constraints of a purchase contract.
Q: What do you think are the top three factors that will reshape the industry in 2014 and why?
Binkley: The top three factors that will reshape our industry in 2014 are new regulations, investors for non-QM loans and a healthy purchase market.
The new regulations are going to reshape not only the way that lenders do business, but also the way regulators audit and enforce the new rules. As for QM, there's been a lot of speculation about how it will restrict originations, which I think is a valid concern.
However, I also think it will create opportunities for forward-thinking companies, and I'm looking forward to seeing what these companies will come out with, in response to non-QM loans. I imagine there will be new solutions that can help the consumers who are shut out of buying homes, due to the enforcement of QM as it stands. This is a time for the industry to be proactive regarding what it can do for the consumer – as opposed to what is being enforced by the government. It is very possible that we will see a healthy alternative for the non-QM loan – and those who create a healthy investment vehicle, for Main Street as well as for Wall Street, will be the winners.