2021 Industry Review & 2022 Expert Forecast

Posted January 10, 2022
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Our team and broker community surveyed the 2021 mortgage industry and real estate news and made detailed predictions for 2022.

Read on to see what we thought of the most critical topics surrounding the wholesale mortgage and housing markets and what we believe will happen this year.

Will Soaring Housing Prices Keep Rising?

The Federal Housing Finance Agency House Price Index (FHFA HPI®) illustrates just how fast house prices are rising in the U.S.: an increase of 18.5% in the third quarter of 2020 to the third quarter of 2021.

In the second quarter of 2021, house prices grew by 4.2%. The seasonally adjusted monthly FHFA index rose 0.9% from August 2021 to September 2021.

2021’s High-Priced Housing Markets

The five states with the highest rates of housing price appreciation were:

  • Idaho 35.8%
  • Utah 30.3%
  • Arizona 27.7%
  • Montana 26.0%
  • Florida 24.8%

Within two weeks of hitting the market, 61.4% of homes went under contract in March 2021, an all-time high.

In June 2021, the median home sale price in the country was $386,000, marking a record high and an increase of 24.4% year over year.

2021: The Year of the Low Mortgage Rate

Will This Trend Continue?

How will mortgage rates and the housing market look in 2022?

Will the Fed’s three interest rate hikes severely affect the mortgage and housing industries? 

Still in a Seller’s Market

“With the lowest interest rates we have ever seen and a rise in house prices, the year 2021 was a great year for mortgages,” says Marc Summers, President of AIME and Broker Owner of Priority Mortgage Lending. “In this industry, you never know what either will do, but I think you’ll see some non-drastic interest rate increases. Additionally, I believe housing prices will continue to rise slightly since we are still in a sellers’ market.”

Housing Prices Will Rise at a Normal Level

“2022 is going to be another strong year for originators, with a purchase market that just isn’t ready to slow down yet and prices continuing to appreciate,” says Hammer Helmer, CEO at OriginatorSuccess.

“There will still be bidding wars, but hopefully we won’t see the overheated increases in prices we saw in 2021, and instead we will see prices rise at a more normal level.”

Moderating Inflation

“According to the NMLS stats, originators grew by 30% from Q4 2019 to Q4 2021,” says Dan Rawitch, Market Mentor at University of Options. “Sadly the first half of 2022 will be a tough environment for many of them.”

“Our industry sheds headcount fast as volume drops. But, this is good news for those LOs that stay focused on cash-out refinancing, nonprime, and purchase business. I believe in Q3 we will see signs of a slowing economy, along with moderating inflation, thus forcing the Fed back to a dovish posture and lower rates.”

Competitive Mortgage Interest Rates Despite Fed Hikes

“The Fed has decided that inflation is running at a higher pace than desired, so they are speeding up their pace of tapering,” explains Kevin Peranio, Chief Lending Officer with PRMG, Inc., an AIME lender partner. They are reducing the amount of mortgage-backed securities and treasuries they purchase each month and should be done with all quantitative easing by April 2022.”

“After the tapering is complete, the Fed will likely announce a 25 basis point Federal fund rate hike which may begin in May 2022,” adds Peranio.

“The consensus estimate is for a total of three Fed rate hikes next year. [The Fed rate hikes] will definitely impact mortgage interest rates but maybe not as much as people are fear-mongering. The Freddie Mac average 30-year fixed-rate right now is at 3.18% and likely won’t go above 3.75% next year, which is still a very competitive interest rate.”

Delinquencies Are Declining

CoreLogic’s September 2021 Loan Performance Insights Report presented a rate of 3.9% for delinquencies on single-family residential homes, compared to September 2020, when delinquencies were at 6.3%.

The percentage of loans that were seriously delinquent sank to 2.4%.

More Equity in Homes

“I do not expect to see a large increase in delinquencies and foreclosures in 2022,” says Brendan McKay, President of Broker Advocacy at AIME and Broker Owner of McKay Mortgage Company. “When the CARES ACT expires, many people will not have economically rebounded from the pandemic, and may no longer be able to afford their mortgage payment.”

“But, I do not expect this to result in foreclosures because of the amount of equity they likely have. Home values skyrocketed during the pandemic, and while these people may not be able to afford their mortgage payments anymore, they will be able to sell their homes at a significant profit rather than be forced into a foreclosure or short sale.” 

Record-Level Home-Equity

According to Black Knight, borrowers had tappable home equity of $9.4 trillion at the end of third quarter 2021, amounting to $178,000 per borrower, which is an increase of 32% year over year.

Additionally, borrowers took out home equity lines of credit at the highest rate in fourteen years during the third quarter of 2021.

Increasing VA Loan Purchase Volume in Younger Generations

“In the last twelve months, our VA loan purchase volume has increased approximately 25%,” says Tyler Hodgson, President of NXT Mortgage Company.

“I attribute the increase to greater awareness of both buyers and sellers of the benefits of the VA loan and the reduction of widespread VA misinformation. As more Millennial and Generation Z veterans enter average homebuyer ages, we expect VA home loan purchases to continue to increase.”

“2022 brings a lot of promise to our brothers and sisters in arms when it comes to the benefits of a VA loan,” says Shelly Heimer, Broker Owner of H5 Financial.

“While the New Year may bring some unpredictability to the market and interest rates, we know that Millennials and Generation X borrowers are taking advantage of their VA entitlement. The ability to save for a down payment on a military salary would be very difficult in our current market.”

“Utilizing the entitlement earned through military service gives them a chance to own part of the American Dream that they have so selflessly fought to defend. They see this loan as a perfect opportunity for financial planning, debt consolidation as well as building wealth through real estate. This generation of military borrowers is figuring out that the ability to purchase with zero down payment can put them in a home much sooner than any other loan and provides them with a stronger financial opportunity as well as long-term success.”

An Increased Focus on Non-QM Loans

In 2021, Non-QM lending attracted a lot of interest and growth. Is it likely that Non-QM will be hot in 2022?

Brokers Should Tap Into Non-QM in 2022

“I think Non-QM will be a larger percentage of the overall originations in 2022. The volume may not be higher, but the percentage will increase as the refinances slow down significantly,” states Carl Markman, Director of National Sales at REMN Wholesale, an AIME lender partner.

“Until the purchase market picks up, brokers will have to learn new products such as Non-QM and others such as renovation products to expand their business.”

Non-QM Loans Are a Referral Builder

“The growth in our market in 2022 is going to be largely in the Non-QM arena. Those who have learned the Non-QM products well will thrive and ultimately have a second loan coming later on from the same client,” says Melinda Payan, President at The Truth About Lending.

“Brokers who complete Non-QM transactions will also create clients for life because typically these borrowers are very grateful for the opportunity to get the mortgage. This is a great tool not only for income purposes but also because you are showing all the people involved in the transaction that you can get the loan done.”

“Soon after, you will see the realtor or referral partner coming to you for all their loans. If you are not doing these types of loans, you are missing out.”

Purchase Season is Ramping Up

Retail mortgage layoffs in 2021 included Interfirst Mortgage and Better.com.

Due to decreasing refinancing, additional retail mortgage layoffs in 2022 are predicted to take place, making the wholesale mortgage industry an attractive opportunity for loan officers, brokers, and other mortgage professionals alike.

The Attractive Wholesale Mortgage Industry

“I suspect that [retail] mortgage companies that staffed up during the refinance boom now have excess operational capacity and will be shedding a significant number of jobs as the market shifts to a purchase market,” says Wade Betz of Axen Mortgage.

“This will be more applicable to refinance shops and will have less of an impact on companies who have focused on purchase business.”

Wholesale Mortgage is for the Consumer

“The shift is on from banks and retail to the broker channel,” predicts Matt Gougé, Sr. Loan Originator at UMortgage, aka “Matt the Mortgage Guy”.

“As consumers get more and more educated about where the best place to get a mortgage is, we’ll see more of this. By being able to deliver the best product at the best price, the broker channel no doubt continues to gain market share.”

Wholesale Mortgage Offers More Benefit

“My predictions for 2022 are that we will see a rate hike and brokers who have not focused on the purchase business will suffer the most,” predicts Pablo Martinez, CEO of Equity Smart Home Loans.

“The rising rates will also draw more and more LOs from the retail side into the wholesale side so that they can stay in business and compete. Broker shops with a strong organization will benefit the most and should be able to do most of the recruiting.”

“Retail lenders will push into the wholesale markets in order to keep volumes as elevated as they can, but their LOs will leave to originate in a broker environment,” states Mike Kortas, Co-Founder of NEXA Mortage.

“This will continue to provide mortgage brokers with even more upside benefits and product options. Mortgage brokers who have built themselves to support these LOs making the transition will benefit the most, while other brokers looking to take advantage of the shift also have some tremendous upside opportunities.”

The Impact of Desktop Appraisals

“Flexible options on appraisals are always welcome, although I expect the tangible impact of Desktop Appraisals to be minimal,” says Brendan McKay.

“I feel that this will be most helpful in rural areas that may be less than an hour drive from the closest appraiser. The requirement that a floor plan of the home is available to be eligible is a serious limiting factor.”

“The better, long-term solution is FHFA adapting the Digital Appraisal process, which would allow a scanner to be dropped off in each room of the home, creating a 3D model of the house that can be uploaded to the appraiser. This would increase productivity five-fold, alleviate availability issues for more remote properties, and eliminate some opportunities for discrimination during the appraisal process.”

2021: Another Whirlwind in Mortgage and Housing

As we continue down the path of 2022, one thing is for certain: brokers are better. Are you looking for the best resources to succeed as an independent mortgage broker? The AIME Member Portal is your one-stop destination for everything you need.

Submit and track AIME escalations for high-level loan issues, join the referral list, change AEs, and obtain exclusive discounts. And, you will have access to over fifty AIME lenders and vendors. Sign up today!

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