Jim Loving: Correspondent lenders face tough call to add niche products
PERSON OF THE WEEK: The COVID-19 crisis had a profound impact on the mortgage industry in 2020. At the onset of the pandemic, many industry experts predicted that home sales and mortgage volume would drop. But in June, a new trend began to emerge: millions of city dwellers, seeking to escape the effects of the crisis, were suddenly looking to buy suburban single-family homes, a trend that accelerated in the second half of the year as mortgage rates rose. fell to new all-time lows.
This meant that mortgage lenders suddenly found themselves in the difficult position of having to deal with increased volume while at the same time figuring out how to serve customers in a completely remote and “contactless” manner.
The impact of the crisis has reverberated across the industry, affecting each segment with its own set of challenges. The corresponding loan segment, of course, was no exception. To learn more about how the crisis reshaped the credit related business, MortgageOrb recently interviewed Jim Loving, vice president, correspondent sales for Planet Home Ready.
Q: How would you sum up 2020 for Matching Lenders?
Magnet: In 2020, at the start of the pandemic, some companies withdrew from the market. Companies that chose to take a more conservative path have done so due to initial uncertainty about how the pandemic would affect the market. These companies have now returned to the arena.
The companies that have chosen to stay in the market, as we have, have experienced substantial growth.
Q: What are you planning or planning in 2021?
Magnet: At least for the first part of this year, interest rates will either remain stable or increase slightly. As a result, the industry could face similar challenges as last year when it comes to operational capability.
Our correspondent volume reached $ 14.4 billion in 2020, an increase of 133% over the previous year. And while I don’t see us doubling volume again in 2021, I think there will be significant growth for our corresponding volume. We are ready to continue to expand our network of lenders and aim for additional growth of 40 to 50%.
To continue our success in our correspondent program, we must seek to develop our network of lenders.
Q: What major challenges will correspondent lenders face in the coming year?
Magnet: One of the challenges that correspondent lenders face will be deciding whether to move into niche products or continue to focus on the products they currently have. Although adding niche products increases the cost of infrastructure, these products have higher margins. From a corporate perspective, a lender can justify the cost if it generates strong business covered by the margins of these niche products.
Margins squeezed considerably in early 2021 – faster than expected – adding to this year’s challenges. We are now back to pre-Covid-19 margins. Companies will need to adjust their financial pro formas to take into account current market conditions, reflecting pre-COVID-19 margins.
Then lenders need to ask, “Is our business on solid footing on those margins, or are we expanding our product base to niche products that offer more margin?” And who do we use as a partner if we want to add these products? Who is structured to support us?
Each corresponding lender needs at least two outlets, so they have consistent access to mortgage products.
House prices are on the rise in most markets, but there may be an exodus from urban areas to peri-urban, rural and second homes as companies recall workers to the office after the vaccine has been widely distributed. Whether the local challenge is high prices or a lack of affordable turnkey housing, regional or state banks, credit unions and independent bankers will look to matching lenders for solutions.
Q: What are your goals for 2021?
Magnet: We will continue to study changes in the industry, particularly with respect to electronic mortgage lending. It is important to have a smooth process in place before handing it over to our correspondent lenders. We are also looking to improve operational efficiency and the overall experience of our lenders. Our goal is to create a transparent sale not only for our lenders and their clients, but also for our team.
Another goal is to continue to offer many products – both niche and mainstream. We are very determined to develop our renovation and manufacturing business. Although Planet has been offering this business for many years, we are confident that these markets will continue to grow.
Q: How do you see the new administration changing the landscape for correspondent lenders?
Magnet: The new administration and Fannie Mae have announced that they will purchase more pre-fab housing loans in 2021. President Biden has also proposed a $ 15,000 first-time homebuyers tax credit, which we will be watching.
With a push for more affordable housing, prefabricated housing is a real solution to this. Corresponding lenders should be prepared to meet both increased demand for prefabricated housing and the needs of new home buyers who could benefit from changes in housing policy.
One thing that I think will remain the same is that there will always be a lot of higher than market interest rates for refinancing. The refinancing market will remain strong.
The views and opinions expressed in this article are those of the author and do not necessarily reflect or represent the views, policies or position of Planet Home Lending, LLC.