So, it’s April… and there is still snow in the weekly forecast… sweet. It looks like we need to remain patient for the official close out of winter and it’ll be that same patience that is tested again as we enter a competitive spring buying season. Here is a stat for everyone to chew on… the average mortgage payment based on median-priced homes could increase as much as 15% this year. We’ve already seen mortgage payments increase by 5% in the first quarter and with the way things are shaping up a new report believes that we could see payment increases between 10 – 15% by the close of 2018. It’s expensive to own a new home… rates are up around 4.25% and with housing inventory so low, sellers are maximizing their gain on sale by capitalizing on the demand. This is not the same post-meltdown mortgage landscape we’ve come to know and love. This is a very tough place to operate in and as a result some lenders are throwing in the towel.
How can a lender the size of MB Financial Bank close a deal in December to bring on 165 mortgage employees and then 4 months later pull the plug on their national retail and wholesale lending production? It’s a head scratcher for sure, but I don’t believe for a second that this is the last company to waive the white flag in 2018. Chasing down production by means of acquisition is a tough nut to crack. Compounded with what I’m calling “purchase margins” taking over in the direct lending space and the already slim origination margins in wholesale navigating through this market will be tough sledding. Much like the weather turning… it’ll take patience to get through this competitive market as it levels the playing field across the industry. It puts FDIC regulated banks on the same level as say a mid-sized, non-bank lender based out of NJ (see what I did there… Princeton Mortgage is based out of Pennington, NJ… come on stay with me here). We’re all competing for the same piece of the pie and because we (mid-sized non-banks) don’t carry as much overhead as depositories we can keep our cost to originate down. This new landscape is a perfect place for a mid-sized lender to grow. Flexibility, execution of your value proposition (which btw should be something more than the standard 3 of tech, price, service because the truth is EVERYONE has those things) and you guessed it… patience can help propel newer lenders into power positions in the industry.
Obviously, I’m a little biased here but partnering with a new company should be more about “Can I grow” than “Let’s make some money”. That applies to everyone… not just brokers signing up with new Wholesalers, but Loan Officers looking for new opportunities alike. We’re in a unique place as an industry… something we haven’t seen since doors were being kicked in and lenders were closing left and right. I strongly believe it’ll be the companies who’ve built themselves up on a foundation of values and culture, along with the will power (or balance sheet) to remain patient, that will have the most success in our new competitive market place.
Talk to you soon!
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The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.