A Broker’s Cheat Sheet to the 2022 Mortgage Industry
As a mortgage broker, you’ve seen the writing on the wall for months. After all, no one expected mortgage interest rates to scrape the basement floor forever.
Well, here we are. Rates are slowly increasing and the highly competitive purchase market continues with bidding wars that put some big-wig negotiations to shame.
The mortgage industry landscape can expect some significant changes in 2022. You may not be at all surprised by this news, but knowing how to prepare for this year’s mortgage environment can help your business flourish as borrower needs evolve. We’ve got you covered with mortgage industry projections and guidance from experts in the field.
The Current Mortgage Industry
The Mortgage Bankers Association (MBA) released historical data on home loan applications earlier this year, highlighting recent purchase and refinance trends. The biggest takeaways include evidence of downward pressure on refinances and an expectation of increased home sales this year. Here’s what the numbers say:
- During the week of January 16th, the 30‐year fixed rate reached its highest level in almost two years at 3.72%. This produced a 37% decrease in refinances.
- Expectations of a stronger economy this year, persistent inflation, and the expiration of monetary policy accommodation should continue to increase mortgage rates.
- The MBA projects the 30-year mortgage rate will reach 4% by the end of 2022.
MBA’s Chief Economist , Michael Fratantoni and MBA’s Economist and Industry Forecaster, Joel Kan wrote, “Rising rates will continue to put downward pressure on refinance activity. In terms of the purchase market, we expect growth in 2022 driven by younger buyers entering the market and housing supply continuing to grow […] Homebuyers are already struggling with elevated sales prices and as rates move higher, there could be a more significant damper on demand unless price growth moderates.”
What Brokers Can Do to Conquer 2022
With the changing market comes shifting borrower needs. That’s why maintaining relevance in 2022 relies on broker agility as the industry evolves.
As Regional Vice President of Production for CF Wholesale, B Passan explains,, “This has always been a cream-rises-to-the-top business, but especially in times like these. Those who can truly differentiate themselves through knowledge, effort, and persistence will thrive. There might be a few bumpy months of transition. But, mortgage brokers should know that they are the plumbing of the real estate business and cannot be easily replaced.”
CF Wholesale’s Director of Operations, Laura Richardson and CF Wholesale’s Vice President of Wholesale Operations, Renee Wiens highlight some key tips for the year ahead.
- Low margin conventional loans – Competition for easy vanilla loans (w-2 applications with significant down payments) have driven out much of the profit margin for mortgage professionals. The appeal of conventional loan transactions has shifted to industry goliaths where high loan quantities make low margins worthwhile.
- The proliferation of government-backed loans – Unlike the mortgage titans described above, independent brokers and smaller institutions are making an effort to promote more profitable business, including expanded FHA and VA offerings as well as non-QM and construction products.
- The down payment decline – On the borrower side of this equation, high home appreciation rates and prohibitive inflation have made large down payments less prevalent. This trend is ushering in higher demand for government-backed products.
As always, brokers who focus on collaborating with real estate agents, earning referrals, and improving customer service should remain successful.
3 Things Your Borrowers Need to Know
Alright. You know rates are increasing… and so do your clients. What else do they need to know? Passan, Richardson, and Wiens weigh in on borrower education for the 2022 mortgage industry.
- The diminishing window of opportunity – With rates expected to continue their rise this year, it’s smart to snag a home loan now.
- Realistic home feature expectations – Rapidly growing inflation means borrowers might need to scale back their wishlists to stay within budget. The good news? Homes should appreciate steadily this year (perhaps a bit less so than in 2021), so it’s probably a solid investment.
- The mortgage experience matters – In a mortgage industry with many competitive loan options, borrowers are wise to select a pleasant mortgage experience. Okay, the home loan process might not be pleasant for anyone. But, seeking out a skilled mortgage professional and user-friendly technology can reduce process friction substantially. (Ahem, CF Wholesale’s loan tech, Octane, makes it easier for everyone.)
How CF Wholesale Can Help
Speaking of Octane (our easier, faster, more convenient loan origination platform), it’s becoming a bigger competitive advantage than ever. Technology is the differentiator of the current housing market.
That’s why we’re always working to improve Octane… every week, in fact. This year, that means making our uploading and initial disclosure experience even better. And that’s just the start.
Have questions? Want to chat about the 2022 mortgage climate? Reach out to your AE today.
A special thanks to B Passan, Laura Richardson, and Renee Wiens for their market expertise and insights.
B Passan brings twenty-five years of mortgage experience to his role as Regional Vice President of Production for CF Wholesale. His background includes leadership positions at Countrywide and EquiFirst as well as ownership of a title company.
Laura Richardson’s 6-year tenure with CF Wholesale has transformed her career. She began as a loan processor for Cardinal Financial and quickly moved up the ranks. Richardson now serves as Director of Wholesale Operations.
Renee Wiens’ mortgage lending expertise spans over 22 years within the Wholesale space. Her management aptitude has supported front end set up, disclosures, compliance, loan processing, underwriting, closing, and funding. She now serves as Head of Wholesale Operations.
“This has always been a cream-rises-to-the-top business, but especially in times like these. Those who can truly differentiate themselves through knowledge, effort, and persistence will thrive.”