5 Takeaways from MBA Annual 2022 That Will Impact Mortgage Lenders

The MBA Annual conference has always been a major source of forecasts, ideas, and breaking industry announcements. With this year’s event taking place a few weeks ago, lenders have had time to digest the many ideas and concepts that came out of the event. From predictions on loan volume for 2023 to announcements around credit scoring and affordable housing, there was no shortage of news that will impact lenders and their borrowers in coming years.

In the latest episode of our Clear to Close podcast, we took the opportunity to talk through the biggest takeaways from MBA Annual to dig into how the industry will be impacted—and how lenders can prepare for changes ahead. Since hosts Alan and Bryan attended, they got to hear news and forecasts firsthand and were able to sync with attendees to gain insight into lender sentiment at a time when the market is both challenging and fast-moving.

Here are the most important things they learned.

Want to hear industry experts discuss their experience at this year’s MBA Annual? Click here to listen to the latest Clear to Close podcast episode: The Biggest News, Ideas & Takeaways from MBA Annual 2022.

Optimism about the market still remains.

In speaking with lenders at MBA Annual, both Alan and Bryan were encouraged to hear positive sentiment despite market challenges. Specifically, lenders remain confident in their ability to weather the storm relative to their peers.

“They’re getting ready for battle,” commented Bryan. “Even if it’s just a face they’re putting on, that attitude is helping to prepare them for obstacles in 2023. They know there’s work to do, but take comfort in the market’s cyclical nature.”

In a push to boost resilience and lower costs, these lenders are scrutinizing their vendor relationships carefully. By determining which providers are bringing value, then cutting out dead weight and leaning further into high-value partnerships, lenders can improve ROI and their bottom lines.

Meanwhile, many non-lenders today are still interested in stepping into the mortgage industry through end-to-end solutions that provide comprehensive resources and operational infrastructure, such as Maxwell Private Label Origination.

“Instead of viewing the market as low-opportunity, non-lenders see a chance to set the groundwork for when volume inevitably returns,” said Alan.

Make no mistake: Challenges do lie ahead.

Despite optimism, much of the messaging at MBA Annual still revolved around themes lenders have been hearing for months: rising rates, declining volume, suffering profitability, and lending businesses closing their doors.

In one session, MBA Chief Economist Mike Fratantoni talked through the new MBA forecast, which predicts the following for 2023:

  • A recession coming in the first half of the year
  • A 9% production decline in 2023
  • Purchase originations to decrease by 3% to $1.53 trillion
  • Refinance volume to decline by 24% to $513 billion
  • Home sales to drop from 5.2 million in 2022 to 4.7 million

With boots-on-the-ground experience from the past year, many lenders questioned whether these numbers err on the conservative side. In other words, lenders appear to be gearing up for a tougher-than-forecasted 2023.

Homeownership accessibility will be a major theme in coming years.

A main topic discussed at this year’s conference was access and inclusion in the housing industry. As American demographics become increasingly diverse, with jobs that don’t necessarily fit into a neat, W2 box, it’s imperative for lenders to offer options that meet changing borrower needs. To this end, several new announcements were made at MBA Annual aimed at increasing lending options and homeownership.

First, the Federal Housing Finance Agency (FHFA) announced a major change to credit scoring:

  • FICO 10T and VantageScore 4.0 will replace the classic FICO credit model
  • These new models will provide more accurate credit scores and a more inclusive way of looking at credit
  • FICO 10T and VantageScore 4.0 will factor in new payment histories, including rent, utilities, and telecom payments

“The announcement of this change is huge,” said Bryan. “To help underserved communities achieve homeownership, we need more datapoints to get an accurate picture of credit. The change to a new credit scoring model is a step in this direction.”

This modification changes the credit report requirement from a tri-merge to a bi-merge, meaning lenders must provide credit reports from two of the three nationwide CRAs. The FHFA is hoping this shift will sustainably expand credit for borrowers with less credit history while maximizing accuracy and inclusivity. It plans to transition to the new model over “a multiyear effort.”

“Data shows that Black borrowers are likely to benefit most from this change,” commented Alan. “A new study from Urban Institute and Federal Home Loan Bank of San Francisco reports that Black households are ‘disproportionately likely to have no FICO scores and to have FICO scores below 620.’ For those families, the shift to alternate methods of credit scoring could make a big difference in the ability to buy a home.”

Secondly, the FHFA announced it has released aggregate statistics sourced from uniform appraisal dataset (UAD) and an accompanying dashboard of data. This release represents the first ever public access to aggregate, anonymized appraisal data, now available publicly as a way to monitor industry trends, appraisal gaps in minority neighborhoods, regional trends, and appraised values. Amid public outcry that appraisals are impacted by unfair bias, the data released by FHFA will provide an important understanding of how appraised values differ among various locales.

Availability of affordable housing is an ever-increasing need.

The lack of affordable housing in the U.S. has been a theme for many years. Recent low inventory and rising interest rates only heightened this topic at MBA Annual.

In one session, the Department of Housing and Urban Development (HUD) discussed new proposed adjustments to Title 1 manufactured home loan program loan limits, a component of the Biden-Harris Administration’s May 2022 Housing Supply Action Plan.

If approved, this proposal will:

  • Increase loan limits and make manufactured housing more viable in today’s market
  • Ensure municipalities aren’t making zoning decisions about manufactured housing based on stereotypes and misinformation

Further, HUD has been looking at finding ways to encourage more lenders to make loans for lower priced homes, including ADUs and condos. These changes represent an effort to incentivize lending options for underserved communities, which could benefit both borrower and lenders looking to connect with new audiences.

Changes are coming to Ginnie Mae RG pools.

Finally, major announcements were made around Ginnie Mae RG pools aimed at increasing issuer liquidity.

These changes will:

  • Alter the re-pooling seasoning requirement for re-performing loans
  • Shorten the seasoning requirement from six months to three months and allow issuers the option to pool re-performing loans into TBA-eligible Ginnie Mae II Multi-Issuer Pools

This policy change reverses a number of temporary pooling restrictions placed on re-performing loans introduced during the pandemic in 2020 and will go into effect no later than Q1 2023.

Overall, MBA Annual contained an interesting mix of industry optimism, strategies to counteract current and future challenges, and policy changes to counteract borrower and lender obstacles. While thought leaders and lenders alike clearly don’t expect 2023 to be easy, the conference made one thing apparent: The industry as a whole is thinking outside the box to support lending success as we move into the new year.

Want to learn more about ideas, sentiment, and news that came out of MBA Annual 2023? Click here to listen to the full Clear to Close podcast episode.

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