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The Mortgage Market in 2015

The mortgage market finished out the year strong in 2014 and the optimism continues into 2015, in spite of some new changes coming our way.  Below, I review both the positive and negative factors that will impact our industry this year:

Positive:

  • Interest rates: Rates declined even further in the month of December and we are currently at the lowest levels we have seen in over 18 months.  This is great news for first time homebuyers, move up buyers and homeowners looking to refinance.  It is also great news for sellers because a potential buyer can afford more house when the interest rates are lower.
  • Programs:  Mortgage lending has eased its underwriting standards slightly therefore making it somewhat easier for the average person to qualify for a mortgage these days.  Credit score requirements on programs such as FHA have lowered the minimum requirement needed to obtain a loan.  Fannie Mae and Freddie Mac have also reverted back to some programs we have seen in the past, such as the 3% down.  This went into effect late last year and will compete with FHA for a minimum down payment program that is now available to consumers.  There are also options for self-employed borrowers who may not have a full two years of documented income.  The addition of these programs can be attributed to a healthy mortgage market and rising home values.
  • Timeliness: The time frame needed in order to qualify for a mortgage loan and close on a property has drastically improved with most mortgage lenders like our company.  I cannot say the same for the big banks but most mortgage lenders and brokers have seen much quicker turn times.  This can be attributed to lower default rates and, once again, the healthier state of our current market.  Underwriters are not scrutinizing files as much so the turn time is much quicker.

Negative:

  • Regulation: Ever since the real estate and mortgage crash back in 2008, our industry has been highly regulated.  Of course, most of the regulation was necessary in order to improve our market and make sure some of the same mistakes would not happen again.  Even though we all agree that regulation is good and it has helped clean up our industry, I believe there comes a point when we might be over-regulating ourselves.  It has been seven years since the crash and we continue to see more regulations put into place. 2015 has two changes coming, one beginning this month, that I will elaborate on in a minute.  Increasing regulation may have unintended consequences. Quite often, these unintended consequences end up translating into higher costs for you, the consumer.
  • Appraisals:  Collateral Underwriting (CU) is a new regulation taking effect on January 26th   that will impose a risk-based score on all Fannie Mae and Freddie Mac appraisals.  This score will determine if an appraisal is acceptable for delivery to Fannie or Freddie which means that, despite a qualified appraiser going out an appraising the property for a certain value, CU may find different comparables and need the appraiser to comment on why he or she did or did not use specific sales in the neighborhood on the report.  Keep in mind that, back in 2010 under the Dodd-Frank Act, the Appraisal Management Company (AMC) was created.  AMCs were created to make sure that no lender, bank, or real estate agent could directly influence an appraiser.  These AMCs would regulate the ordering of appraisals and assign them to only local appraisers that were approved under their system.  They also would serve as a quality control figure for the accuracy and integrity of the appraisals.  Many questioned this new system for numerous reasons but mainly because the price of appraisals went up for the consumer.  With the implementation of this new CU, it almost guarantees more work for the appraiser because they are going to be spending more time trying to justify the quality of their work.  And if the appraisers are having to do more work, I am sure it will just be a matter of time before we see the price of appraisals increase which will be yet another expense that the consumer will bear.

In spite of the increased regulation, I believe the positives outweigh the negatives and there will be more benefit than cost to the consumer.  I believe we will continue to see a strong market in 2015 that will allow consumers to achieve the American dream of homeownership.

If you have any questions about this topic please don’t hesitate to contact me. To learn more about our company and mortgage products, please feel free to call Dan Longman, President of Priority Lending Corp, at 954-438-3776 ext.11 or email me at prioritydan@bellsouth.net. Visit us online at www.prioritylendingcorp.com

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