10 outrageous 2021 predictions for the mortgage industry

December 29, 2020 5:30 AM

If a year ago at this time, everyone looked into their personal crystal balls and predicted mortgage originators would have their best year ever in the midst of a pandemic, odds are that would have been considered too outrageous.

For 2021, National Mortgage News reached out to people in the mortgage and ancillary businesses for their (more or less) outrageous predictions on what could happen. Several of our pundits' short takes on the market are diametrically opposed!

Answers have been edited for length and clarity.

Pop goes the bubble

"Banks realize that real estate is in an artificial bubble and rates are artificially low," said Michael Chadwick of Chadwick Financial Advisors. "They realize that values are likely to go down from here and they're going to be saddled with fixed rate mortgages that are upside down and [will] crush their balance sheets. They pull back on lending and increase standards to what they used to be: 20% down, only top credit with financial reserves and clawback provisions. This is what it always should have been."

Mortgage loans made in a digital currency

"Twenty-five percent of all mortgages (mainly in cities like Austin, San Francisco and Denver) will be made in Bitcoin (BTC). The mortgage will be 'tokenized' on a blockchain," said Harsha Naidu, Tavant's head of artificial intelligence. "Tranches of a loan will be sold as BTC addresses, packaged together on the secondary market, linked to a BTC Exchange Trade Fund."

Naidu also sees lenders changing the way they assess borrowers because of the coronavirus. "The loan underwriting process will drastically change to include 'health points' like, 'you have got the vaccine, you are in good physical and mental health, more points to you;' the rationale is as you will be alive, you will keep a job and pay back the loan."

And social media could affect underwriting as well. "Facebook will use all of your data and serve up pre-approved loans for homes. It will suggest based on models and it will build on your posts, photos, submitted info," Naidu said.

Tesla gets into prefab housing, Amazon offers title insurance

Abhinav Asthana, head of product at Tavant, said, "Tesla/Elon Musk will get into the manufactured/prefabricated housing business. Their homes will be powered with solar cells, rechargeable batteries and have native intelligent home capabilities."

Manish Arya, chief technology officer at the company, said, "Amazon [a company rumored to be interested in getting into mortgage] enters the title insurance market, and undercuts incumbents by 50%."

Mohammad Rashid, head of consumer lending at Tavant thinks "mortgage rates will go further down — below 2%."

Regulatory scrutiny could get invasive

"The mortgage industry needs to get ready for regulatory scrutiny. It is like a colonoscopy — no one likes it but you have to face it to determine if you need to address any issues that could prevent future more damaging problems," said Sanjeev Dahiwadkar, founder of IndiSoft. "You will see many lenders, servicers and other mortgage-related stakeholders receiving scrutiny from various regulatory agencies including the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, state agencies and many others."

The end of the QM patch will not lead to more non-QM

"In spite of what I'm hearing, 2021 will not be the year for heavy non-qualified mortgage volume," said Jim Paolino, CEO of LodeStar Software Solutions. "A likely slow start for the overall economy; the adverse market fee; and a possible rise in the interest rate will prove to be the headwinds that prevent a big year for that product. It will have its place soon, but not in 2021."

Servicing liquidity to increase even with low rates

"We expect rates to continue to trend low to slightly higher through 2021," said Michael Dubeck, Planet Financial Group CEO and president. "We also expect valuations and liquidity in mortgage servicing rights to climb as we come out of the pandemic, based on improved delinquency profiles as borrowers work their way out of forbearance and investor confidence improves."

Government program becomes competitive with PMI

"The Federal Housing Administration will reduce its upfront mortgage insurance premium and regain market share," said Daniel Jacobs, Tru Loan Mortgage's managing direct. "The FHA also will reinstate the sunset of monthly MI to reduce prepayments."

Jacobs has a couple of other predictions that reference past trends. "Depository aggregators will start a price war for correspondent jumbo mortgages. By the fourth quarter, home equity lines of credit will be back in fashion like a runway model."

Unlike Paolino, Jacobs is bullish on non-QM in 2021, declaring the product's volume "will double quarterly!"

Public nonbank lenders' stock value will decline

Some bad news for those did or are contemplating initial public offerings. "Values of publicly traded mortgage companies will fall by 50% as investors fear a decade of weak refinance activity and its negative impacts on independent mortgage bankers' net income," Jacobs said.

And one comment on the change in Washington: "Zero tweets will impact regulatory policy!"