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As mortgage lenders move into the new year, the challenges – and unexpected loan volumes – of 2020 will not soon be forgotten.
“Where we started in January and where we ended up in December, you could not have predicted, but it ended up being in many ways one of our most challenging years that I can recall but also in many ways one of the most rewarding years,” said David Lazowski, a New England senior vice president for Fairway Independent Mortgage.
Lenders expect the changes they had to make in 2020 to adjust to the pandemic while supporting the surge in business will continue to affect the new year. With interest rates set to stay near record lows and hopes for an improving economy, the purchase and refinance markets will likely remain strong, including for homeowners and buyers who have not yet had opportunities to take advantage of low rates.
Even as COVID-19 cases continue to surge, the housing market is one reason Boston Federal Reserve President Eric Rosengren has an optimistic economic outlook for the second half of 2021. In a speech to the Greater Boston Chamber of Commerce last week, Rosengren noted how low interest rates have added fuel to the industry.
“The housing sector has been helped by low mortgage rates, and the eagerness of many households to transact real estate despite the challenges of the pandemic (and in some cases, because of the pandemic and the lifestyle changes it has ushered in),” Rosengren said, according to the text of his speech provided by the Fed.
He added that he expects low interest rates, higher asset prices and more savings to support continued home purchases in the coming year.
More Opportunities
The changes in homebuyer demand brought on by the pandemic – leading people away from cities to the suburbs and beyond for more space – have been thwarted in part by a common problem: low inventory.
Once COVID-19 vaccine distribution accelerates, the pool of mostly older sellers absent from 2020’s housing market could become more comfortable putting their homes on the market, said George Koutsos, a regional vice president with CrossCountry Mortgage in Danvers. That additional supply could help ease the demand pressures that generated rapid sale price increases last year.
With bank deposits and personal savings growing, especially for those who remained fully employed throughout the pandemic, however, Koutsos expects people to be willing to spend on housing as the year goes on.
The low mortgage rates will also continue to give homebuyers more purchasing power, said Fairway’s Lazowski, adding that with demand high in the purchase market, he expects 2021 to be as busy as last year.
An improving economy will also keep demand high, as more people return to the workforce or see their business revenues improve, putting them in a better position to qualify for a mortgage.
With stable, low interest rates predicted through the rest of this year and the economy likely to improve, more prospective homebuyers will likely be able to qualify for more and larger mortgages.
“Anyone that is self-employed, there was a heightened underwriting process they needed to go through to ensure that their revenue was still flowing into their business, and that’s still true today,” Lazowski said. “A lot of people that maybe could not take advantage of things in 2020 are getting back or will get back to normal very soon, and those people will be able to also take advantage of the low interest rate environment.”
‘Next Generation’ Needed
The mortgage volumes in 2020 posed challenges for staffing and infrastructure, Lazowski said, noting that the processing time for loans was longer than he would have liked. Infrastructure improvements made throughout last year will help staff better handle the expected volumes and improve the turnaround time for loans, he said.
While the pandemic brought about the need to meet with customers through teleconferences instead of in person and adjust to a changing process, Lazowski said he expects these types of interactions to continue even after the pandemic, likely resulting in a hybrid process. He added that the technology for processing loans that lenders had begun adopting before the pandemic has proved useful, creating less friction in the transaction and reducing closing times to as little as 15 minutes.
Handling the volumes has also meant bringing on new staff. Lazowski said he added 135 employees to his office in 2020, a 40 percent increase. He noted that loan officers tend to be older, in their mid-50s on average, and the industry in the year ahead will need to continue preparing its suddenly-younger workforce.
Diane McLauglin
“Because we hired so many more people into the industry in 2020, we still need to train up what I’m calling the next generation of mortgage professionals,” Lazowski said.
Koutsos, with CrossCountry Mortgage, said focusing on refinancing volumes has meant new loan officers have had limited opportunities to establish relationships with Realtors and other referral partners, a key for building purchase activity.
“With the volume of activity, it has been more challenging because we’re no longer seeing them face-to-face, we’re no longer entertaining and having events,” Koutsos said. “A lot of loan officers currently are just working on the low-hanging fruit, which are the refinances, and forgetting about their referral partners.”
