Now that 2023 is in the rear view mirror, it’s time to look ahead to 2024. PROGRESS in Lending got commentary from 13 top lending visionaries representing 10 different companies all active in our space today. Here’s what they think is to come this year:
Eric Fox, Chief Economist at Veros Real Estate Solutions, says:
Our one-year forecast from 2023 Q3 had an expected average nationwide appreciation of +2.2% forecast … This quarter’s one-year forecast will be similar, between 2% and 3%. This is being driven by slightly softening inflation (current rate of 3.1% and softening to 2.9% over the coming year); unemployment is increasing somewhat (current rate of 3.7% and increasing to 4.7% during the next year); supply remains very constrained (A large number of homeowners have mortgages with very low interest rates … Even though mortgage interest rates have come down slightly to 7%, they aren’t going to entice folks with a 3% mortgage to sell their homes); and we don’t see this constrained supply improving at all. In total, 40% of homeowners own their home outright (the largest percentage in history), and these folks are impacted little by higher prices or expensive credit, meaning they can come/go as they please. Finally, those who own their home outright are the oldest homeowners aged 65 and older. This, too, is not going to get better as the percentage of the adult population 65+ is projected to steadily increase throughout the rest of the decade from current levels: 2016 = 15%, 2020 = 17%, 2023 = 17.3%, and 2030 = 21%. So, even if we have economic conditions that will tend to soften house prices, this historic population distribution shift and constrained supply will mitigate it dramatically, causing continued modest upward pressure on pricing, in our view.
Daniel Jacobs, Division Managing Director at TruLoan Mortgage, thinks:
Margins will do the “bend and snap.” As rates begin their expected descent, many lenders will “bend” their margin lower to attract market share. Then the spread between the 10-year and mortgage rates will retreat from their unusually high 300 bps spread back toward their typical 150-170 bps spread. That’s when lenders will “snap” margins back into place, paving the way to healthier profits. FHA will reduce MI premiums and attract greater market share. Non-servicing retail lenders will get clobbered by EPOs while servicers aggressively defend their balance sheets with below-market refinances like we’ve never seen before. Most originators will not meaningfully participate in the refi boomlet they’re so looking forward to. Overage will be back! That’s right, not only will par rates be the norm again by Q3, we’ll be able to routinely cover closing costs for borrowers with above par pricing. First-time buyers will represent the highest ever share of homebuyers in the second half of the year. The lock-in effect of would-be move up buyers is real and will remain a consequence of sub three percent rates of the pandemic. Pent up structural demand of first-time buyers will drive the market until rates get in the 5.5% rate range.
Joe Ludlow, EVP of Sales at Advantage Systems, points out:
In today’s higher interest rate, lower volume, purchase loan environment, success for lenders often hinges on having “feet on the street,” meaning community-based branch locations with local loan officers familiar with the market and realtors. This is driving an industry trend of more lenders looking to establish localized branch networks to seize specific market opportunities. Rather than investing in costly corporate-controlled branches, lenders are favoring a more entrepreneurial approach to the branch network model, recruiting experienced loan officers already operating within their target markets and entering into contractual agreements with them to operate a branch location under the lender’s brand. This approach has also revealed the limitations of viewing branch performance solely through loan volume, so many lenders are now employing a true branch Profit and Loss (P&L) model and full branch impact analysis reporting. This enables lenders to evaluate not only loan-level income, but also detailed operating expenses intelligence to gain a more holistic understanding of each individual branch’s true financial performance and profitability. Detailed reporting capabilities also help branch managers ensure accurate and prompt compensation for their loan officers.
Joe Camerieri, EVP of Sales and Strategy at Mortgage Cadence, predicts:
We’ll face challenges in 2024, certainly, but most mortgage and real estate focused economists are now predicting a low-rate environment by the third or fourth quarter of next year. Rates are still high, and inventory is low, but the 10-year Treasury is already dropping due to global economic concerns, and, in November, the MBA revised their mortgage volume estimate up to over $2 trillion in new loans next year.When we approached that number for the first time, many years ago, our industry was euphoric. Nothing is certain, but the industry’s leaders have never let go of that optimistic feeling. I won’t be surprised to see the rebound begin in 2024.The question is, will lenders be ready when it happens, because it will happen fast. Do they have the right tech stack, a plan for their underwriting department, an idea of how they’ll earn more money on each loan?The industry leaders in 2024 will have well-trained teams, using the industry’s best loan origination technology and giving borrowers exactly what they want: a wide menu of loan offerings delivered via an easier, faster, more affordable loan origination process. I expect to be working with many of them.
George Morales, Reverse Mortgage Product Manager at Mortgage Cadence, adds:
I expect 2024 to go down in history as the year of unprecedented usage of home equity products. When it comes to the federally-backed Home Equity Conversion Mortgage (HECM) aka reverse mortgages, FHA recently announced its eighth consecutive annual increase in the lending limit. Thanks to this, in 2024, older homeowners will have greater access to their home equity. There is a flood of new seniors who will qualify for a HECM in the new year. Aging Boomers is the fastest-growing segment of the population, with 56 million homeowners collectively holding $12.2 trillion in untapped equity. Cost-of-living expenses also continue to rise, inflation isn’t helping, and older homeowners want to age in place in homes that hold all the memories of a life well lived. A reverse mortgage can make it possible. And finally, lenders are starting to look at reverse mortgages as a product instead of a separate business, which lowers the threshold to get started. This brought crowds to the fall reverse mortgage conferences, including some of the nation’s largest forward lenders. Adding reverse mortgages to their product mix in 2024 will also unlock referral business from the children and grandchildren of the older homeowners they serve.
Carly Peroutka, Senior Director Consumer Finance, Verification Services at Equifax Workforce Solutions, notes:
Few steps of the loan origination process are as time-consuming or tedious as income and employment verification. Lenders traditionally verify income by contacting the loan applicant’s employer or asking applicants for paystubs or W-2s. Lenders still relying on this “old school” practice of collecting physical documents directly from the applicant should consider a more efficient option. The traditional manual employment and income verification process can create friction for the customer and lender. This process burdens consumers as they attempt to find and submit documents, adding additional risks and vulnerabilities for inaccurate documents. Additionally, the industry has seen a rise in the use of “fake pay stubs” and there are many websites where false pay stubs can be created in minutes. Lenders should streamline and optimize this critical activity for themselves and their borrowers. Using an instant data provider to verify income and employment ensures lenders with a permissible purpose have the data they need to approve an applicant faster, remotely, and safely. Data provided directly by employers can increase certainty throughout the decisioning process, reducing the risk of future defaults resulting from over or under-inflated customer-provided income.
Shannon Johnson, Touchless Lending Program Manager at Tavant, believes:
2024 is poised to witness a transformative shift driven by technological strides. Companies, irrespective of size, are eager to capitalize on recent advancements. The era of rigid, multi-year contracts tethering businesses to outdated technology is waning. Flexibility and adaptability are becoming paramount. Foreseeing a potential drop in interest rates, there’s optimism for a miniature refinancing boom. Companies strategically investing in themselves stand to reap substantial benefits. The agility to navigate a changing financial landscape will be a key asset. Despite the tech-centric focus, the enduring value of personal relationships remains pivotal. In an era of instant gratification, the human element is indispensable. Recognizing our inherent social nature, successful mortgage professionals will blend cutting-edge technology with personalized connections. As we embrace the future, a harmonious balance between innovation and human touch will define the industry’s trajectory in 2024.
Mohammad Rashid, SVP, Head of Fintech Innovation at Tavant, adds:
Navigating the 2024 mortgage landscape, the focal point revolves around the pivotal interest rates significantly influencing and shaping home purchases and refinancing. The 30-year mortgage rate, having peaked above 8%, recently eased to 7.05%, with an anticipated slide to the 6-6.5% range by year-end. Geopolitical factors—two wars, a looming recession, stagnant supply, and subdued inflation—suggest the Federal Reserve is poised to maintain or further reduce rates, indicating positive news for the mortgage industry. This quarter’s dip is foreseen as a base, with a gradual resurgence in 2024, driven by increased purchases and heightened refinancing. Simultaneously, Home Equity Lines of Credit (HELOCs) are gaining traction, with lenders strategically aligning themselves. Despite declining interest rates, high home prices prompt homeowners, equipped with substantial equity, to capitalize on HELOCs in preparation for potential economic downturns. The trajectory of home prices remains uncertain. Presently, they persist at elevated levels, possibly stabilizing or experiencing marginal declines. The delicate balance between supply and demand suggests that builders may exercise caution, potentially impeding a substantial decrease in home prices, despite the easing interest rates facilitating home acquisition. As 2024 unfolds, a cautiously optimistic atmosphere emerges, signaling a shift from the prevailing gloom and doom.
Abhinav Asthana, Product Business and Growth Leader at Tavant, continues:
As we anticipate 2024 trends, my strategic outlook is centered on dynamic shifts in the market. Home equity is poised for substantial growth, driven by high home values and homeowners’ commitment to property maintenance. The HELOC business is anticipated to thrive, with non-bank and investment lenders entering the arena. While inflation stabilizes at 3.1%, a potential resurgence in refinancing is projected, particularly for those seeking relief from 7-7.5% mortgages. Despite declining home prices in hyperinflated markets like the Bay Area and New York, there’s pent-up demand for home purchases. With interest rates stabilizing and prices adjusting, a moderate uptick in purchases is expected in 2024. On the technology front, strategic investments focus on acquisitions for market share consolidation, innovation in technological advancements, and the adoption of generative AI. The latter is gaining prominence for enhancing customer experience, improving employee efficiency, and streamlining processes, with applications in proactive decision-making, cycle time reduction and enhanced customer support. In 2024, the industry’s technological emphasis revolves around generative AI’s role in improving efficiencies and reducing costs. Notably, the perception of AI has evolved, thanks to advancements like Chat GPT, highlighting the speed at which AI models can be deployed for scalable business applications. From Tavant’s perspective, investments continue in touchless learning ecosystems, emphasizing touchless automation’s value for both traditional and non-QM lenders. AI, particularly generative AI and natural language processing, seamlessly integrates into the touchless product ecosystem, exemplified by Tavant’s incorporation of sentiment analysis and collateral assessment in touchless automation products.
Lisa Schreiber, President at LSK Consultants, says:
Mergers and acquisitions will continue throughout the first half of the year. Those acquiring will be focused on growing multiple channels of business. Also, cash-out refinances will make up over 40% of Originations. Debt consolidation will be the main driver for those with equity. The industry should watch LTV limitations. Lastly, non-agency, including commercial style loans will continue to grow with all origination channels (primarily in wholesale) but may lose momentum if agency rates dip below 5.5%.
Michael Hammond, President at NexLevel Advisors, points out:
Lenders and vendors who leaned in during the challenging market conditions of 2023 and strategically invested in marketing and business development will see significant increases in market share in 2024. Those companies that made too deep of cuts to their marketing, brand awareness, and strategic selling efforts will be playing catch up in 2024. Also, AI will continue to evolve and drive greater results for those who embrace the technology and learn how to utilize its capabilities fully. Mastering the art of prompts and leveraging subject matter expertise while being able to personalize output will lead to differentiation in the marketplace. Lastly, the power of video will continue to expand in 2024. Video has revolutionized the way businesses communicate and engage with their audience. Its immersive nature allows for a compelling storytelling experience that transcends the limitations of traditional text-based content. In the realm of mortgage lending, where trust and reliability play pivotal roles, video serves as a powerful medium to humanize brands and build genuine connections. Video content enables mortgage lenders and vendors to showcase their unique value proposition, company culture, and expertise in an engaging format.
Dalila Ramos, Founder at Love and Tacos Media, predicts:
As I look ahead to what’s in store for mortgage lending this year I really think we will have a mini refi boom this year. I also think we will start seeing loan originators compensation change/reduced. Lastly, the Inventory shortage will still continue, especially in no state income tax states such as FL, TN, TX, etc….
Brandie Young, Fractional CMO at Brandie Young, Inc., concludes:
With the rise of fintech startups and innovative technologies that could further enable DIY mortgages, the industry is facing increased competition and pressure to innovate in 2024. A natural extension is to broaden offerings to earn larger mindshare and change the way mortgage lenders are categorized. Mortgage lenders have long stood as gatekeepers to the dream of homeownership, offering a critical bridge between aspirations and reality. Yet, in today’s fast-evolving world, where personalization is key, sticking solely to basic loans won’t cut it. To truly connect with borrowers and foster lasting relationships that go beyond transactional interactions requires innovation. Innovative mortgage products are just the start. Think flexible repayment plans tailored to individual financial situations or income patterns—these could be game-changers for solopreneurs, or commission-based individuals whose earnings fluctuate month-to-month. Education has long played a vital role too because the home buying process can be daunting! But now that everything from dinner to a Friday night date is delivered in a swipe, do consumers want to take the time to learn, or do we need to find ways to do the heavy lifting – be the TurboTax of lending? But why stop there? How about leveraging data analytics to anticipate customers’ needs before they even articulate them? By analyzing spending habits and life events, lenders might offer timely refinancing options—or perhaps introduce insurance products related to property ownership—all underpinned by an ethos of helping clients protect their investments. These innovations do more than meet practical needs; they forge emotional bonds rooted in trust—a currency far more valuable than any dollar amount lent out.