Forecast: Mortgage rates won't rise, Fan-Fred will survive
By JEFF LAZERSON / CONTRIBUTING COLUMNIST
Here are my 2016 mortgage and real estate predictions:
1) Mortgage rates are not going up. The 30-year fixed will average 3.75 percent next year. Before you laugh out loud (thinking rates are going over the moon), please be reminded that I have been right every year since I started forecasting for the Register (2013-2015).
2) The Federal Reserve will not raise short-term rates at all in 2016.
3) Nationally, loan volume will hit $1.4 trillion next year, which is slightly lower than this year’s $1.47 trillion. Refinancing, especially cash-out refinancing from the price run-ups, will increase while the purchase market will slow down.
4) Orange County’s residential home sales volume will drop by 5 percent compared to 2015.
5) Median Orange County home prices will drop by 1 percent from this year’s $604,000. Lower-end sales will increase, but the higher end will subside.
6) Mortgage broker market share will increase by 5 percent next year. The current share is 9.7 percent through Q3 2015, according to Guy Cecala, CEO and publisher of Inside Mortgage Finance. Lending standards are improving, offering more access to credit, but many of the big lenders won’t participate. Good loan officers want a wide menu to better serve their clients.
7) The Consumer Financial Protection Bureau will put an end to the age-old payola called Marketing Servicing Agreements, whereas mortgage vendors receive exclusive access to realty agents for a monthly stipend. Brokerages are going to make up the shortfall by taking more of the commission split that is divided between the realty agent and the brokerage. As a consequence, we will also see many more agents go independent.
8) The new TRID compliance requirements are causing havoc in the jumbo loan jumbo market (loans too big to sell to Fannie Mae or Freddie Mac). Investors are refusing to buy jumbos from lenders because everyone has a different interpretation of whether the loan complies with regulations. As a result, the securitization market for jumbos will plummet next year. Portfolio jumbo lenders (like banks) are going to make a killing because they keep the loans rather than sell them.
9) Nothing changes on the regulatory front, be it expanded borrower qualifying ratios or the contemplation period. The new six-day rescission on refinances and three-day rescission on purchase transactions will cost borrowers roughly 0.125 percent more in rate lock extension fees. If we fund $1.4 trillion in 2016, that is going to needlessly cost consumers $1.75 billion. 10) Fannie and Freddie stay, conservatorship or not. At least Congress is wise enough to know if they get rid of F&F, the U.S. housing market will collapse.
Jeff Lazerson - Mortgage Columnist since 2011