The 2 truths: Taxes & Technology… wait isn’t it “death and taxes?” Welcome to the 21st Century.
I believe it was Ben Franklin that said, “…the only sure things in life are death and taxes”. Well, it looks like Ben was on point back in 1789 because the tax bug just took a big bite out of our industry. Freddie Mac & Fannie Mae, who have been the two driving forces for the mortgage industry resurgence, have to take a dip (actually, more like a cannonball) into the Treasury watering hole. For the first time since 2012, both GSEs will need to take money from the Department of the Treasury to cover their multi-billion dollar loses in the fourth quarter of 2017. Now that statement seems eye-opening, but many experts predicted this was going to happen when the Republicans passed the reformed tax plan that reduced the corporate tax rate to 21% and dramatically affected the GSEs’ deferred assets. I’ll be honest, I don’t know exactly what that means (if you're interested in the details, go here), but my question is what impact will this have on the housing market? Freddie & Fannie play a huge role in the secondary market through securitization so will this need for cash affect market pricing? Will it have any impact on the Fed and the interest rates? Personally, I don’t think anything crazy (like a bailout) will come of this. Both Freddie & Fannie CEO’s have gone on record saying that their positions are strong, and growth will continue in 2018 and beyond, but it has made headlines so don’t be too quick to overlook.
And while we’re on the topic, I think we need to update Mr. Franklin’s saying… how about “the only sure things in life are death, taxes, and advancing technology”? I can order a driverless car to pick me up and take me to dinner; I can order a new laptop with my voice why lying in bed that will be delivered in 2 days; I can walk on the Great Wall of China through a headset while sitting on the couch. Yesterday, tech company StreamLoan announced that it raised $2 million to fund the growth of its mobile-focused digital mortgage platform meaning that advancing technology has even made its way into the mortgage industry. But in a sense, isn’t that risky? If companies are constantly coming up with new technology, is it worth sinking millions of dollars into proprietary systems when it’s likely that something better will become available? What about investing that $2 million into company culture and operations so you attract the right talent and become known as a company that cares about making an impact rather than one that tries to create the cool new toy?
“Alexa, please order me a 30-year fixed mortgage with a 4.5% rate”.
Photo Credit: Alexandra Fleischman / The Daily Pennsylvanian
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.