An Opportune Time For Mortgage Services

With a housing market rebound likely to continue, credit unions can start to think about how to create new mortgage lending service.

Earlier this month I highlighted the concentration in the mortgage market, notably the 34% market share of Wells Fargo. The Wall Street Journal recently reported that the concentration has led to big delays in response for loan applications and higher fees as well. These delays weren’t limited to distressed borrowers but extended to those simply wanting a lower rate. I’m not suggesting that credit unions pour all resources into creating new mortgage lending services, but there is clearly an opportunity for credit unions that have capacity to highlight the credit union advantage.

It’s always good to find a source that agrees with you. As I’ve written in the past, I expect the housing market will complete the bottoming process this year with modest price increases to follow. Fiserv has weighed in today with a similar outlook. The service provider expects home prices to bottom by the end of the summer and increase by 4% per year for the next five years. Fiserv cites low rates and falling inventories as the reasons for the rebound.

In mid-May refinancing applications rose by more than 1%, and purchase applications rose by over 3%, according to the Mortgage Bankers Association. The rise in purchase applications was good for the week but still leaves the four-week average down .8%. Refinancing applications are expected to continue to stay strong as more people apply in hopes that they can qualify for HAMP and other programs offered by Fannie and Freddie.

Investors Play A Crucial Role

Although I like to find sources that agree with me, it also makes me uncomfortable. I guess I prefer to be out on the limb by myself. Here is the potential flaw in the outlook. The surge in investor demand is what has sopped up the supply of homes. The view that housing will improve remains largely dependent on those investors staying active through this year as more foreclosures hit the market.

But investors can be fickle. Certainly real estate investors aren’t usually as fickle as stock investors, but most of today’s real estate investors are former stock investors. Investors have been buying over 30% of the homes sold for more than a year now. Should investors be scared away by some negative economic events, they could easily be turned off the housing market. The elements are certainly in place for a rebound from a housing bottom, but we can’t afford to presume the rebound is inevitable.

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May 27, 2014

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