The mortgage trade is roaring for the most effective yr ever because of the Fed

The Federal Reserve had the best year ever for US mortgage lenders. Nobody knows this better than Shant Banosian, the industry's first billion dollar salesman.

The loan officer says he will personally raise a staggering $ 1.5 billion in home loans from his office outside of Boston by the end of the year, a record in a record year for the mortgage business.

The mortgage industry is on fire with the Fed's low interest rates and bond purchases. Fannie Mae said lenders will borrow $ 4.1 trillion this year, beating the 2003 high. This is largely thanks to the borrowers who are refinancing to reduce their home payments.

With the largest profit margins ever recorded, mortgage lenders are on a hiring frenzy, taking advantage of the pandemic real estate boom to raise money from investors. At least nine have either gone public this year, such as Rocket Cos., Or are planning to do so in the coming months.

But like all booms, this one won't last forever. According to a forecast by Fannie Mae, mortgage volumes could fall by a third by next year as refinances fall. Even if prices stay the same, the number of homeowners motivated to make savings will decrease.

"Today's market is like a giant roller coaster ride – the higher it goes, the more dramatic the decline," said Jim Cameron, senior partner at Stratmor Group, a mortgage adviser based in Greenwood Village, Colo. They know prices change at some point and you will lay off a lot of people. Why hire? But honestly, the profits are here now. "

Recruitment battle

The industry is currently hiring people to handle all of the business. The recruiters are in an all-out "firefight," said Cameron. Companies offer signing bonuses to steal underwriters and processors from competitors, or give hold payments to keep them from leaving.

According to researchers from Bank of America, lenders increased their workforce by 25% in July and 40% in August on an annualized basis. Figures from the Bureau of Labor Statistics suggest that there are now more than 100,000 mortgage brokers in the US, the first time since 2007 that it has broken six-digit numbers.

Banosian, who has a Guaranteed Rate office in Chicago, increased its workforce by half to 40 to keep pace with the flurry of requests from buyers moving to larger suburban homes or saving a bundle on refinancing. Nationally, the company has more than 400 job vacancies on its website.

"I expect rates will stay low for the next year," said 40-year-old Banosian in an interview in his 4,000-square-foot office in Waltham, Massachusetts, while his employees work remotely. "We plan to hire employees."

$ 1 billion

Last year, Banosian took out $ 916 million in mortgages, according to the Scotsman Guide, which began compiling its ranking in 2009. This year it reached $ 1 billion in September. He expects 3,000 loans under his name worth at least $ 1.5 billion this year. And he plans to expand into other states.

Guild Holdings, which is focused on providing mortgage delivery to homebuyers, sold shares to the public in October and plans to grow its business in Florida, the northeast and central parts of the country, Guild chief executive officer Mary Ann McGarry said in one Interview. And they are filled quickly.

United Wholesale Mortgage, the nation's largest lender for mortgage brokerage, now employs more than 7,000 people, up roughly 40% year over year. NewDayUSA, a veteran-focused mortgage lender, has nearly doubled its workforce since March and plans to grow even further in the coming months, CEO and founder Rob Posner said in an interview.

Big margins

While mortgage rates have never been this low, they could be lower. Most loans are sold and then packaged into bonds. The Fed has bought more than $ 1.3 trillion worth of mortgage bonds since March, driving prices up and allowing lenders to sell their loans at a high premium. Lenders say they raised interest rates so as not to be overcrowded with business and replenished profits.

The average lender took out $ 1.34 billion in mortgages in the third quarter, up 33% from three months ago and as much as a typical company would produce in a year, said Marina Walsh, vice president of industry analysis at MBA. Earnings per loan hit a record $ 5,535 in the third quarter, up 22% from three months earlier, the Mortgage Bankers Association said Thursday.

Different story

The next year could tell a different story depending on the pandemic. A successfully used vaccine could bring the economy back to normal. If employment recovers, it could bring more people into the housing market. But if interest rates rise even slightly, this could wipe out the refinancing boom.

Fannie Mae, who expects borrowing costs to stay flat, said the mortgage volume for home purchases will grow about 4% over the next year. That won't offset an expected decline in refinanced loans to $ 1.1 trillion next year from $ 2.6 trillion in 2020.

So far, lenders have not run out of consumers to refinance. There are still nearly 20 million homeowners who could save an average of $ 300 on their monthly mortgage payment at today's rates, according to Black Knight Inc.

However, if refinances go down as predicted, lenders will look for homebuyers to make up the difference. And that will depend on the strength of a real estate market that has run hot and has put prices out of reach for some Americans.

"The Fed was a godsend for the mortgage industry," said Tendayi Kapfidze, LendingTree's chief economist. “However, the demand from borrowers will be lower. The low hanging fruits are gone. "

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