It Is Time to Make Some Additions and Address Any Needed Repairs

Originations Volume Over Time

A global pandemic, mortgage interest rates at their lowest point on record for over fifty years, and a shift from a Republican to Democratic administration made 2020 an unprecedented year. The drop in mortgage rates (with an all-time low in December 2020 of 2.66 percent for a thirty-year fixed) fueled a boom in mortgage originations driven primarily by refinancing.

The Mortgage Bankers Association predicts that there will be a shift from a higher concentration in refinance loans in 2020 to a greater number of purchase loans starting in 2022. MBA’s projections of the shift are driven primarily by a change in the historically low interest rates to rising interest rates, capping at 5 percent by 2023.

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Key Risks and Changes in Mortgage Origination Rules

The historically low interest rates in 2020 had lenders scrambling to address the refinance boom. This rush resulted in a record-high number of complaints submitted to the Consumer Financial Protection Bureau (CFPB) associated with issues closing loans. As stated in the CFPB annual complaint report for 2020, “Complaints about applying for a mortgage or refinancing an existing mortgage increased in 2020, likely driven by increased origination and refinancing activity due to low mortgage interest rates. Complaints about applying for a mortgage increased 88% from the prior two years’ monthly average.”

In addition to this increased number of complaints, new focus from the Biden administration, coupled with changes in origination rules, will result in increased attention on mortgage origination activities in the near future. Key areas of change include:

  • Increased focus on fair lending
  • Implementation of the new Uniform Residential Loan Application
  • Changes in Qualified Mortgage (QM) rule
  • Home Mortgage Disclosure Act threshold changes