Mortgage lenders must adjust to a radically different lending environment if they are to succeed in the year to come. Declines in mortgage originations, especially refinancings, and a return the basics of purchase mortgage lending will challenge lenders, and even so employment will shring significantly, John Walsh, CEO of Total Mortgage said in an interview with The Niche Report.
“Every year people have said that this will be the year when the refinancing boom will end and everyone who wants to refinance has done so. Well, we believe this is the year. It is a reasonable bet that we will see rates begin to rise by the second half of the year, and that will kill refinancing, ” said Walsh.
Instead, lenders will switch back to purchase mortgages for home buyers, a business Walsh predicts will grow 16 percent in 2013. However, purchase mortgages wont be enough to offset the loss of refinance volume and the Mortgage Bankers Association estimate of a 24 percent drop in mortgage origination volume from 2012 to 2013. Given the length of time that historically low rates have persisted, the potential market for refinances has diminished significantly - many that are able to refinance have likely already done so.
Industry experts at Total Mortgage predict that the current industry employment of approximately 280,000 will decline by almost 100,000 over the next 12-18 months. A combination of lower volumes, industry consolidation and greater operational efficiencies will result in a 30-35 percent drop in industry employment.
The significance of the shift from refinance orientation to purchase orientation cannot be overstated, Walsh said. Much of the existing mortgage industry is built on the dominance of mortgage loan refinancing. Its diminishment and eventual status as a minor piece of the business represents a structural change of the highest magnitude.
The vast majority of mortgage originators are wholly unprepared for the unique requirements of sourcing and servicing purchase borrowers. The ability to build relationships over a much longer sales cycle will separate the survivors from the pack of those soon to be “pursuing other options,” Walsh said. “The reduction in employment totals will expose a new problem: the graying of the mortgage industry.”
Walsh is preparing for challenge by hiring younger staff and institituting training programs to prepare them for the changes underway in the marketplace and at the regulatory level.
Total Mortgage Services, LLC is a direct-to consumer and wholesale mortgage lender. Licensed in 27 states and the District of Columbia, Total Mortgage offers a wide array of mortgage loans. In 2010, Total Mortgage launched its wholesale lending platform TMS Funding. The company was founded in 1997, and has been included in the Inc. Magazines' list of America's Fastest Growing companies in 2011 and 2010