New mortgages predicted to break all-time record in 2021

Hold onto your hats, because if mortgage bankers are correct, home sales are going to crush it next year with mortgage originations predicted to hit a new record of $1.54 trillion.

The forecast, presented at a virtual Mortgage Bankers Association convention, would represent an 8.5% increase compared with 2020, eclipsing the previous record of $1.51 trillion set in 2005.

For 2021, existing U.S. home sales volume will increase by 10% and new home sales will increase 12%, according to Mike Fratantoni, MBA’s chief economist, Joel Kan, vice president of industry forecasting, and Marina Walsh, vice president of industry analytics.

The trio also concluded that total mortgage volume (purchases and refinances) is expected to decline to $2.49 trillion in 2021 from 2020’s $3.18 trillion volume, which was the highest amount since 2003’s $3.81 trillion total.

As the 30-year fixed-rate mortgage is expected to rise to 3.3% in 2021 from the 3% average rate in 2020, refinance mortgage originations are predicted to dive by more than 46% in 2021 to $946 billion from 2020’s $1.757 trillion refinance volume.

And, what about those long refinance lines? You were not imagining that.

“In 2019, (all refinances) averaged between 45 to 55 days from application to closing,” said Walsh. In 2020, just 36% of refinances closed between 40 and 60 days. MBA data indicates the remaining 64% of refinance borrowers took at least 60 to 120 days to close. Capacity and staffing constraints were cited as key reasons for the long waits.

Overall, the volume of loans funded is expected to drop 23% from 10.4 million in 2020 to 8 million in 2021. Shorter lines coming, for sure.

The 2021 predictions assume an effective COVID-19 vaccination and a stimulus bill being passed, according to Fratantoni.

Here are a couple of other items of note from the convention …

What’s in your wallet?

It was almost 30 years ago when grocery stores started taking credit cards. Well, mortgage servicers may now be poised to accept your credit card to make your mortgage payment.

As part of the tech solution showcase at the MBA convention, Sagent Lending Technologies offered to loan servicers a robust digital wallet to manage borrowers’ accounts (mobile or desktop), refinance opportunities and even forbearance and loan modification considerations.

“We’ve introduced the concept of the wallet, said Mark Steir, senior vice president of consumer products at Sagent. Borrowers can pay by automated transfer or credit card, according to Steir. You can make one payment or recurring payments.

Sagent’s spokesperson declined to answer my questions, including which loan servicing lenders are offering this, what credit card companies are participating, or if there are additional charges for paying by credit card, any credit card rewards program limitations, and how many borrowers are using the credit card feature.

If you are good at managing your finances and you can earn rewards and those rewards are not offset by any additional charges from your mortgage servicer for using a credit card, I’d say just charge it. Keep in mind if you accrue any credit card interest charges, that could be far more expensive than the note rate on your mortgage. And credit card interest is not typically deductible.

What about that ½-percent adverse market fee that starts December 1 on refinance transactions? Loan balances of $125,000 or less and F & F’s affordable refinance programs are exempt from the adverse market charge.

Federal Housing Finance Director (regulator and conservator for Fannie Mae and Freddie Mac) explained that adverse market fee comes from Fannie Mae and Freddie Mac’s pandemic loss estimates of about $6 billion. This includes loan losses, foreclosure moratorium expenses and forbearance expenses.

OK, but why stick the adverse market fee on refinances only? In my experience, there’s more risk of a new homeowner defaulting than a refinance borrower. Not fair.

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Jeff Lazerson - Mortgage Columnist since 2011