Most industry experts are predicting a $1 trillion or less market now that the 2nd quarter is in the record books at about $295 billion or approximately 25% more volume than Q1.
These new forecast numbers are causing lenders to rethink and re-evaluate their growth strategies. While some lenders are seeking a merger/capital partner so they can continue to have growth in this market, others are reviewing the different channels of business and are evaluating their options as a direct servicer to offer a correspondent channel.
Recently, a national mortgage company decided to exit that space and dedicate additional resources to grow retail and their servicing portfolio.
Another bank just exited the “QM” space to focus on buying loans from correspondents nationally in the non-QM segment of the business.
Additionally, a regional correspondent investor just announced an affinity relationship established with a regional bank that will offer all conventional, FHA, VA, USDA programs through them and still use the bank’s name to its customers. This regional mortgage banker recently changed their focus from traditional correspondent lending to offering outsourcing solutions to small- and medium-sized banks and credit unions that don’t want to assume the regulatory burdens for originating a loan along with the higher compliance costs.
Some large servicers and specialty servicers are looking at ways to not only protect their existing portfolio but to grow using the origination business as a way to achieve their objectives.
Although many are involved with MSR acquisitions, I have recently seen some start up different lending channels, such as correspondent lending, as a way to grow their servicing platform. While one could argue that the correspondent lending channel is overcrowded, most of the newer entrants are getting involved with their eyes wide open as far as volume expectations and objectives.
Some of these servicers are also looking at subservicing as a natural fit to what they do and as a way to generate additional fee income.
Still other lenders are also currently evaluating their product menu offerings as a way to stay current for recruitment and competitiveness in the markets they serve. As more investors offer non-QM products and construction lending programs, originators are gaining more interest in participating. Warehouse banks are getting more competitive pressure from their customers in allowing these programs too.
The fun is only beginning!
QE 3 is quickly coming to an end, with the end of the Fed buying program being Halloween. Many loans locked this month and next can fall into October deliveries. With that said, most industry observers believe interest rate volatility is just around the corner.
Other contrarians said we could actually see something counter-intuitive like rates actually dropping which can cause all other kinds of issues for our business.
In any event, the need for lenders to manage interest rate risk and their pipeline has never been greater! If there is any advice worth repeating here, is that it is critical for lenders to manage their mortgage pipelines carefully over the next few months as volatility with interest rate swings can become the “new normal.”
If you would like to learn more about new product and program offerings described above, please contact your local MGIC account manager for more information.
Should a company grow organically or acquire other branches/companies to create scale? I would love to hear your thoughts, please share in the comments.Tags: FTHB, Lending, Millennial, Mortgage Industry, Servicing, Top Content