It’s Really Not That Bad!
If I’ve taken anything away from my 26-year mortgage industry career, it’s that the market will always fluctuate. There are highs and there are lows and all of it is inevitable.
Mortgage loan professionals who jump ship at the first sign of rising interest rates or an economic slowdown are the same people who dump their stocks at the slightest downtick. Holding on, just a little bit longer, will usually prove to be a wise choice. Mortgage interest rates go up and they come down. That’s as normal as the tide coming in and out. It’s perfectly logical that higher rates, with their corresponding higher payments, result in fewer qualified borrowers. But, when you think about it, even though there may be fewer qualified borrowers, there are still more than enough “fish in the sea” to put food on your table every night. Not to mention that less competition resulting from the exodus of mortgage professionals who didn’t realize this, who neglected to see the forest for the trees, and who weren’t all that serious about working in the mortgage industry in the first place provides more business for those who stayed.
Think about this in micro doses. Maybe lending is down. But have you calculated the loan volume that you would need to originate in a given year to achieve your desired income? If you haven’t, why haven’t you? I would make doing so your number one top priority. Because, without knowing what your end goal is, how could you honestly know if you’re on track to achieve it or if things are really as bleak as you might see them to be? Once you’ve defined that number, you have something concrete to work towards.
Once you’ve defined your desired and optimal volume, it should become apparent to you that, even with the recent reduction in mortgage volume, there are still enough borrowers out there actively borrowing mortgage funds, to allow you to reach, and likely even exceed, your goal. Not to mention how every customer you originate into a higher-interest-rate loan now is a future refinance customer when rates ultimately decrease as they always do. Maybe now is the time to consider securing licensure in more states to expose yourself to more potential customers! But that’s a story for a different day.
The important takeaway is to maintain a proper perspective, realize that things aren’t as bleak as they may seem, that rates will decrease just as they increase, business will pick up, and what we’re currently experiencing is nothing more than a natural part of the normal economic cycle.
Bad News Good News
Through its August 22, 2022 Mortgage Finance Forecast, (https://nmlstraining.com/wp-content/uploads/2022/08/2022-08-23-MBA-Mortgage-Forecast-1.pdf) the Mortgage Bankers Association (MBA) predicts that mortgage loan volume will continue to drop throughout the remainder of 2022 with an eventual uptick expected in 2023Q2. The good news is that the downtick is not expected to be as horrendous as many feared it would be and there will still be plenty of origination business to capture. More than enough to facilitate you achieving your goals.
As declared by the MBA, 2021 U.S. one-to-four family mortgage origination dollar volume amounted to $4,437 bn consisting of $1,863 bn in purchases and $2,574 bn in refinances. Although 2022 overall production is predicted to be less than 2021’s production, the difference is relatively negligible ($1,638 bn for 2022 as opposed to $1,863 bn for 2021).
Purchase money originations is expected to take a hit in 2022Q3 down to $388 bn when compared to 2022Q2 originations which amounted to $427 bn. The MBA predicts a slight uptick, however, in 2022Q4 followed by the typical downtick representative of post-holiday season sluggishness.
The good news is that the MBA predicts that 2024Q2 will begin a rapid increase in origination volume with 2023 expected to close out better than 2022 with even higher numbers expected for 2024.
The way to capitalize on the current market is to spend the quieter times learning, growing your business, creatively marketing, and expanding your abilities to capture the business that’s still available. The most important part, however, is to not lose faith. The volume will return. It has to. It’s literally how the process works.
People will always need homes and a means to finance them. Instead of looking at the glass being half empty, focus on ways that you can capitalize on present opportunity while developing your flexibility to weather the storm. I promise it will end. And the rainbow will be bright.