All of the mortgage trends highlighted below, along with low mortgage interest rates and larger than expected lender profits, began in 2019. Phil Shoemaker with HousingWire believes all three will continue and grow stronger as competition and the need for technology and adaptation increases in 2020.
1. Mergers and acquisitions will grow. A recent report from the Mortgage Bankers Association indicates that in Q3 2019, lenders achieved their highest profits per loan since 2016.
– Profit per house came in at $1,675 on each loan origination.
– This amount of profit per loan is a huge contrast from the profit per loan, $285, in Q1 2019.
- This profit per loan is second only to Q3 2016 when profits hit $1,773 per loan.
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2. Despite such profits, lenders still struggled due to increased competition. Increased competition among lenders is expected to continue into and throughout 2020 and as a result, more merger and acquisition activity is expected next year.
3. Freddie Mac predicts a slowdown in the economy from 1.9% to 1.3% by the end of 2020. One of the results of such an economic slowdown translates into there not being enough buyers to compete for in the marketplace. Not enough buyers = a surge in mergers and acquisitions.
4. Broker expansion
– Shoemaker wrote, “At the end of the day, economies will win.”
– This statement translates into there being better pricing for customers because larger brokers can offer more price differentiation via more products.
3. Fintech to increase.
– Brokers will continue to live in an “adapt or die” environment. Adaptation translates into improving technology in order to keep up with every-changing regulations and requirements.
– Fintech giants could well surge far ahead of smaller players in such an environment.
– Companies such as eXp Realty, Zillow, Quicken Loans, Opendoor, Redfin and others are expanding their respective reaches by offering more real estate and mortgage lending-based products.
– More companies are launching iBuying programs.
– With a shared goal of becoming one-stop- shop real estate brokerages, 2020 could become the year that brings all these companies closer to this shared goal.
– By necessity, mortgage brokers MUST keep up with fintech in order to survive.
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