It was surprising to find, looking at the 2010 Home Mortgage Disclosure Act data, that $1 trillion in mortgage applications went unfunded that year. That's nearly 40% of a total of $2.6 trillion in apps.
In 2009, the story was the same—$1.2 trillion in unfunded apps, compared to $1.8 trillion in fundings exactly 40%. The figures for 2011 aren't in just yet, but they probably will be similar.
Mortgage lenders should take a second look at those unfunded mortgages. It might just be one of the best lead generators of the year.
Obviously, we are not advocating a return to a time when anyone with a pulse could get a mortgage.
But it also seems obvious that $1 trillion is too high an amount of unfunded mortgages.
What if, on second review, 10% of this amount was found to be creditworthy? That would be $100 billion in originations. In a new year where many are saying the business will be hard pressed to reach $1 trillion in fundings, that would be a significant number.
Another thing 2012 should bring is an end to the common wisdom that “mortgage rates can't get any lower.” At the end of the year rates, which couldn't go below 6% or 5%, were below 4%. Could 30-year rates go down to 3%? Not likely, but theoretically, if an institution's cost of funds was 50 basis points and it was willing to live on a 250 bp margin, it is possible. Big depositories are paying less than 50 bp on savings already.
2012 won't see the end of the foreclosure crisis. Most people think it is roughly half over—a couple of million done, a couple of million left to go.
What that means is that at last, the servicing market will be starting to return to normalcy—if not this year, perhaps in 2013—and wise servicers will do well to start planning for that.
After several of the wildest years ever seen in the servicing business—for good and bad—it is possible now to see, and start planning for, a book of business like the ones servicers used to see.
In fact, that book of business likely will be better than “the good old days,” since there is such a big emphasis now on credit quality and low loan-to-value ratios. That's a servicer's dream!
It is hard to say whether the servicing glass is half empty or half full, but it's half something.
