Lending industry leaders surveyed by Fannie Mae see a housing supply shortage as the top risk factor for 2024, but most also expect refinancing to increase next year if interest rates continue to fall.
in Inman Connect Las VegasFrom July 30th to August 1st 2024, the noise and misinformation will be cut through, all the big questions will be answered, and new business opportunities will be revealed. Join us!
Nearly two-thirds of mortgage lenders have cut staff in 2023, but most expect to maintain or increase staffing this year. investigation Mortgage giant Fannie Mae has fired more than 200 senior executives.
The survey found that two-thirds of mortgage industry executives believe there is a high probability that the U.S. economy will fall into a recession within the next two years, down from 93 percent a year ago.
Lending industry leaders believe a shortage of housing supply is the biggest risk factor for 2024, but the majority (64%) expect a new mortgage refinancing boom to begin this year or next if interest rates continue to fall.
Take part in the July INMAN INTEL INDEX survey
Doug Duncan
“Following the 2023 staffing reductions, staff sizes appear to be normalizing at their lowest levels since 2014 as lenders are generally less pessimistic about the direction of the economy and mortgage market,” Fannie Mae’s chief economist said. Doug Duncan writes: To summarise the findings:
“Mortgage transaction volumes have likely bottomed out following a period of historically high mortgage purchase and refinance volumes post-pandemic,” Duncan wrote. “As a result, we believe some mortgage lenders are prepping their staffing to handle a potential increase in mortgage activity if the housing market recovery continues slowly for the rest of the year and into 2025.”
Fannie Mae’s mortgage lender sentiment survey, conducted in early May and released this month, collected input from 215 senior executives at 198 lenders, including mortgage bankers, depository institutions and credit unions.
Top business priorities for mortgage lenders
sauce: Fannie Mae Mortgage Lender Sentiment SurveyJuly 2024.
“Talent management and leadership” was the top priority for most executives, followed by cost reduction and streamlining business processes.
“Talent retention is a top priority,” an executive at one large financial institution told Fannie Mae. “We want to retain our high-performing LO (loan origination) team and continue to look for new talent to join the organization. We are in growth mode for the foreseeable future.”
Fannie Mae defines a large institution as one with 2023 loan originations of more than $245 million.
While 62% of mortgage executives said they cut staff last year, 54% said they expect headcount to be about the same in 2024 as last year, and 28% said they expect to increase headcount this year.
With mortgage rates rising above 7% last year to levels not seen in more than 20 years, cutting costs and streamlining business processes became top priorities for mortgage executives.
An executive at a mid-sized financial institution with total loan volume between $46 million and $245 million said streamlining business processes remains a top priority, and the institution is moving to a cloud-based system “to minimize new product introductions and streamline the process for employees and members seeking loans.”
Offering new products and services is a top priority for one in four executives surveyed, with a leader of a small lender (loan volume under $46 million) saying, “We’ve seen a significant decline in traditional loan volume over the past 18 months, so we’re looking at other ways to generate revenue, including new products and different services.”
Consumer technology investments were a top priority for lenders in 2019, but for the third consecutive year they did not make the top three.
Lenders less confident about recession over next two years
sauce: Fannie Mae Mortgage Lender Sentiment SurveyJuly 2024.
Mortgage executives believe there is a greater than 50% chance of a recession in the next two years, but only 19% consider a recession “very likely,” down from 57% a year ago. Nearly half (48%) of lending industry leaders still consider a recession “somewhat likely.”
The most common risk factor cited by mortgage officers was a lack of housing supply (64%), followed by changes in mortgage rates (59%), household debt levels (35%) and home prices (31%).
Fannie Mae economists warned last year that the Fed’s tightening of monetary policy would likely lead to a recession, but reversed that view in January.
Fannie Mae’s June forecast: Highly regarded The Economic Strategic Research (ESR) Group projects purchase mortgage originations will rise 14% to $1.5 trillion next year as 30-year fixed-rate loans fall to 6.3% by the end of next year.
Fannie Mae economists predict an even more dramatic increase in refinancing next year, with refinancing volume increasing 46% to $544 billion.
Two-thirds of mortgage executives surveyed by Fannie Mae expect a refinancing boom. While only 6% see it happening this year, 26% expect refinancing activity to pick up in the first half of next year and 32% see the boom starting in the second half of 2025.
Get Inman’s Mortgage Brief newsletter delivered straight to your inbox: our weekly roundup of all the biggest mortgage and settlement news from around the world, delivered every Wednesday. Click here to subscribe.
Email Matt Carter
