Refinancings have fallen off the cliff and the mortgage industry is bracing for a decline in originations. But some lenders are going against the grain and increasing their capacity.
Nationstar Mortgage has been investing in its origination platform and each loan officer closed nearly 20 loans in the second quarter, compared to nine loans in the first quarter.
“We are beginning to see some impact of the investments we have made,” Nationstar chief executive Jay Bray said last week.
The giant servicer has plenty of refinancing opportunities due to its $318 billion servicing portfolio.
However, the Lewisville, Texas, company is moving into the purchase mortgage space. And it has “increased incentives to drive more purchase money [originations] in our wholesale and correspondent channels,” Bray said.
Meanwhile,
Redwood expects to originate $8 billion in jumbo loans this year. But it wants to expand its capacity to do “much higher volumes,” an executive said during a conference call last week on the company’s second-quarter earnings.
Chairman Martin Hughes revealed that Redwood has received approvals to be a Fannie Mae and Freddie Mac seller/seller. “We will be in a position to purchase agency loans in the fourth quarter,” he said.
While some are optimistic and looking for larger market share, the forecasters at the Mortgage Bankers Association don’t see much room to grow.
The MBA economists expect purchase mortgage originations will hit $312 billion in the second half of this year versus $303 billion in the first half.
At the same time, refinancings will plunge to $300 billion in the second half—down from $673 billion in the first half.
Fannie Mae executives made it clear that they have no intention of relaxing their underwriting standards or reducing loan fees to increase its purchase mortgage volume. But they won’t be surprised if lenders pull back on credit overlays.
“We do not expect to reduce our underwriting standards,” Fannie chief executive Tim Mayopoulos told reporters during a conference call.
As a result of high defaults and loan buybacks, lenders have imposed overlays on top of Fannie’s underwriting standards that make it harder for borrowers to qualify for a loan.
“With the decline in overall mortgage volumes, originators will be looking hard at the overlays that they put on our credit box,” Mayopoulos said. “We think there is an opportunity for them to provide more flexibility without us changing our underwriting standards.”
A recent loan officer survey by the Federal Reserve Board indicated some banks have eased their underwriting standards “somewhat.”
Economists at Wells Fargo Securities have noticed some easing in credit standards. Lending standards have “eased up slightly as more lenders have returned to the mortgage market,” according to a monthly “Housing Chartbook” by the WFS Economics Group.
Another factor may also come into play that will make the mortgage market more competitive. Fannie and Freddie have traditionally charged their biggest customers, such as Wells Fargo, lower guarantee fees. But that has been slowly changing over the past few years.
Discussions on Capitol Hill and among regulators about leveling the playing field are fueling expectations that all lenders will soon pay the same basic g-fee.
