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get into a larger house or one more suitable for their
changing needs. The job of mortgage professionals is
to help these people navigate the new lending environment and guide them toward options that enable them
to make the most of their financial prospects.
With a goal of extending the availability of various
programs targeted at first-time homebuyers and those
who didn’t qualify previously for loans, mortgage
banks and lenders should familiarize themselves with
available government programs and then market those
programs to reach a larger pool of potential borrowers.
New government programs have emerged and guidelines have been modified to assist potential borrowers
who have been impacted by the weakened economy
and the related job market challenges of recent years.
One program that mortgage professionals should
be familiar with is the FHA’s “back to Work” initiative,
which could provide new opportunities for borrowers
who lost their jobs and homes during the recession.
According to a mortgagee letter released this past
August, this program aims to help borrowers who are
ineligible for FHA-insured mortgages because of the
agency’s waiting period for bankruptcies, foreclosures,
deeds-in-lieu and short sales, as well as those whose
eligibility has suffered because of delinquencies or
indications of derogatory credit, including collections
and judgments. With the assistance of this program,
these borrowers could be eligible for FHA-insured
mortgages even with these knocks against them.
In addition to taking stock of all available government programs, mortgage banks and lenders should
take a fresh look at their own qualification requirements and make sure that they’re keeping pace with
the current lending landscape. Otherwise, they could
be overlooking groups of borrowers who are eligible
for certain government programs.
Some lenders, for instance, recently have expanded
their credit requirements on all government products,
reducing minimum FICO scores and making the qualification process easier for borrowers. To further extend
lending opportunities among consumers, some lenders
also have modified their guidelines to include manufactured houses as eligible properties for FHA and VA loan
programs, omitted overlays for FHA first-time homebuyer loans, and added nontraditional credit guidelines
for FHA borrowers with limited or insufficient credit.
Expanded guidelines like these increase the borrowing potential of consumers while also widening a company’s pool of applicants. Heading into 2014, mortgage
bankers and lenders should be sure that they’re current
with their competitors’ evolving guidelines, as remaining stagnant could mean falling behind.
The coming year likely will present mortgage professionals with a number of new and continuing challenges. The most obvious of these is how to grow
purchase-based business amid predictions that
interest rates will continue to rise throughout 2014.
Although predictions concerning mortgage rates are
merely educated guesses based on current market
conditions and related expectations, many economists seem to agree that rates will be in the 5 percent
range at some point next year.
In a forecast published this past September, the
Mortgage bankers Association predicted a gradual
rise in 30-year fixed mortgage rates that would settle
at 5.1 percent by the end of 2014. This is a relatively
dustry under went a variety of changes,
many of which were tied to improve-
ments in the economy and the housing
market. by the middle of the year, the long-
awaited housing recovery seemed to reach
full stride, with improvements in home
values bolstering the buying and selling
power of borrowers who were previously
underwater. The move-up market was
stimulated and a new inventory of at-
tractive homes opened up to inter-
Even as home prices increased,
interest rates remained relatively
low throughout the first half of
the year, allowing many long-term renters to consider
entering — or in some cases, re-entering — the market.
During this time, there was also a refinance boom. The
Home Affordable refinance Program and streamline
refinances from the Federal Housing Administration
(FHA) and U.S. Department of Veterans Affairs (VA)
were all the rage. These refinances of current FHA and
VA loans did not require appraisals and allowed owners to lower their payments by refinancing into lower
by the year’s mid-point, interest rates began to
creep up again in conjunction with continuously rising home values. There were reasonable expectations
that the Federal reserve would begin tapering the
amount of Treasuries and mortgage-backed securities it was — and is — purchasing on a monthly basis
with its third round of quantitative easing, aka QE3.
Although the effect of this was short-lived and rates
began to level out again, predictions across the market continued to point at interest rates increasing at a
This looming threat of progressively rising interest
rates has taken a noticeable toll on the refinance market. Mortgage banks — and borrowers — already have
begun to witness a reduction in the tangible benefits of
available refinances, such as FHA and VA streamlines.
Add in the effects of the upfront mortgage insurance
premium for FHA loans and suddenly the refinance market has taken a double hit. As expected, the number of
applications for refinances has declined compared to
These realities have played a key role in redefining the mortgage industry, forcing it to shift its focus
away from refinances and concentrate instead on the
burgeoning purchase market. In the second half of the
year, many lenders and mortgage brokers began to do
just that, while others simply took it as a sign to exit
That brings up a pressing question: What might be
in store for the lenders that remain? Let’s take a look.
Moving into 2014, mortgage professionals must remember that change is inevitable — and in many
cases, a positive thing for their businesses. It may be
a challenge to reset your thinking to view refinances
as a secondary product. For years, they have been the
bread and butter of this business. It’s important to
note, however, that this shift toward concentrating on
purchases has emerged in large part because of positive changes in the economy and the housing market,
both of which have been struggling for some time.
Suddenly, many Americans have the flexibility to do
more — whether that means buying their first home,
28 Scotsman Guide Residential Edition | scotsmanguide.com | December 2013
Ray Brousseau is executive vice president for Carrington Mortgage Services LLC’s Mortgage Lending
Division. A 22-year veteran of managing distributed
retail lending operations, he is responsible for all
aspects of the company’s retail business, from origination through fulfillment, and oversees both centralized and branch sales along with operations for the fast-growing
enterprise. reach brousseau at (949) 517-6079 or via e-mail at