5 takeaways from this year’s MBA Annual, and what lies ahead in 2018
The Mortgage Bankers Association (MBA) Annual Convention & Expo last week in Denver brought together the MBA and its members with government and the private sector under the theme of “The One.” During the event, attendees heard from industry leaders, policy makers, and economists on topics impacting the mortgage finance market both today and in the future. There was also ample time to visit “The Hub” of industry partner and service provider displays, one on one meetings, and networking events.
Here are five highlights from the conference for our readers.
- Housing Market to Stay Steady Amid Rising Prices, Interest Rates
MBA Chief Economist Mike Fratantoni said during a press briefing that he expects to see $1.2 trillion in purchase mortgage originations during 2018, a 7.3 percent increase from 2017, based on continued economic growth, a strong jobs market, and higher wages. In contrast, refinance originations are expected to decrease by 28.3 percent from 2017, to approximately $430 billion. Fratantoni said he expects mortgage interest rates to rise in the coming years but “not terribly fast and not terribly much.”
However, a lack of housing inventory is still making it difficult for many buyers to enter the housing market, notes Lynn Fisher, the MBA’s vice president of research and economics. There are no signs that the inventory shortage will be addressed anytime soon, she added, noting that homeownership fell after the housing bust when many homes became rental properties. Many of those rentals are owned by “mom and pop” investors who are making incomes on the properties and have little incentive to sell, she said.
The recent hurricanes in Texas, Florida, and Puerto Rico and the California wildfires will stretch homebuilder resources and may increase home prices and the cost to build new homes. However, the hurricanes will not have a lasting effect on mortgage activity, Fratantoni said, noting that application activity rebounded to normal levels just a few weeks after the storms hit.
- Income Growth is Critical to Housing Industry Growth
General session keynoter Mohamed El-Erian, the chief economic advisor for Allianz and the former chief executive and co-chief investment officer at PIMCO, said income growth is “absolutely critical” to stabilizing the housing market. “Income is not keeping up with rising home prices and the gap is growing,” said El-Erian. “The industry desperately needs income growth. We’ve gone as far as we can go on artificially low interest rates. Income growth is so important to so many parts of the economy.”
- Affordable Housing is Everyone’s Problem
“Demand for affordable housing greatly exceeds the supply, causing tight markets and high prices for both rental and owner-occupied properties,” Dave Motley, CMB, president of Colonial Savings and MBA’s 2018 chairman noted in a general session. There are fewer homes for sale today than at any point in the past 18 years, he says, and apartment occupancy rates are the highest they’ve been since the mid-1980s.
“What can we do as mortgage bankers?” Motley challenged attendees. “We should be thought leaders on ways to prudently grow supply. We should engage with our sister trades – homebuilders, Realtors, and multifamily lenders and developers – to find solutions to the problems at the state and local levels,” he said. “We can also work with partners in the settlement and title services business to improve transparency so the home buying and closing processes work more smoothly.” Consumer advocacy groups, other trade groups, and the CFPB also can be allies, he noted.
“We share a common goal: a healthy, vibrant housing market that provides consumers with access to homes that best suit their family’s wants and needs.”
With such collaboration, the industry can better influence policy makers “to fix the regulatory and legislative burdens that are driving up costs and constraining our ability to serve our customers,” said Motley.
- The Case to Embrace Diversity and Inclusion
Motley described the majority of the housing finance industry as “pale, male, and stale,” calling on members to increase the numbers of women and minorities they hire and promote. “We are quickly becoming an industry that no longer reflects the people we serve,” he said.
He cited the potential over the coming decade for 16 million new households to be created, most of whom will want to own homes. These households will be primarily minority, and many headed by Millennials, he noted.
MBA has a diversity and inclusion committee, sponsors career fairs, and provides educational tools to help members meet their diversity goals. Additionally the association is partnering with the National Association of Real Estate Brokers (NAREB), the National Association of Hispanic Real Estate Professionals (NAHREP), and AREAA (Asian Real Estate Association of America) to share resources and work toward common goals.
“This is the future,” said Motley, “companies that don’t embrace diversity and inclusion are going to be left in the dust. It’s just that simple,” he said.
“We need to reflect the marketplace that’s coming our way,” added David H. Stevens, CMB, president and CEO of the MBA.
- Innovation from the GSEs
The GSEs each provided updates on their products and how they are helping lenders work more effectively in a highly competitive environment.
Freddie Mac’s Chief Executive Officer Donald H. Layton announced his company’s partnership with LoanBeam.
LoanBeam’s software is able to calculate a borrower’s income directly from the borrower’s income documents and will improve the income verification capabilities of Freddie Mac’s Loan Advisor suite, Layton said.
Fannie Mae announced an expansion of Day 1 Certainty™, an initiative that helps make the loan origination process more efficient for mortgage lenders and borrowers while giving lenders the certainty of representations and warranty relief on key loan components. Single source validation, now in pilot, offers Day 1 Certainty on a borrower’s income, assets, and employment through a single asset report ordered from a single approved vendor that the lender chooses. “We expect to roll out single source validation in 2018, making sure lenders have the broadest possible choice of vendors,” said Fannie Mae President and CEO Timothy J. Mayopoulos.
Additionally, in early 2018, Fannie Mae will launch DU Messages API, an application programming interface, to give lenders a quick and convenient way to plug into Fannie Mae’s data and technology. “We’re going to start making APIs business-as-usual for lenders,” said Mayopoulos. Fannie Mae will introduce additional APIs across the entire loan cycle, he added.
To learn more about Fannie Mae’s announcements at MBA 2017, visit BuildingOnCertainty.com.