Reversing Florida Mortgage, Housing Trends May Benefit Consumers
Mortgage bankers better hope they took advantage of the last four years. Thanks to increasing interest rates, the real estate industry is now getting ready for a slowdown that could prompt a handful of lenders to merge with their competitors.
Who would benefit the most from this result? Consumers. During the months leading up to this possible consolidation, the mortgage banking scramble for customers will pay off for potential home buyers. These individuals are already seeing lenders cutting loans fees, while some lenders are offering lower mortgage rates, even if it decreases their profits.
Dougless Duncan, the chief economist at the Mortgage Bankers Association, discussed the recent home mortgage trend.
“Companies are losing money to keep market share,” he said. “The consumer is being subsidized because the competition is so fierce. For the short run, the consumer is getting a better deal.”
Unfortunately, once this period of consolidation and mergers is over, consumers are unlikely to get such a good deal. There won’t be price gouging after a wave of mergers, according to Duncasn, but fees probably won’t be slashed as much as they are today.
At a recent mortgage banking industry convention, many executives were worried about rising interest rates dimishing consumers’ interest in looking to buy homes or refinance existing mortgages. Lenders expect to process $2.26 trillion of home loans next year, down from this year’s expected $2.78 trillion and far lower than 2003’s record of nearly $4 trillion worth of loans processed.
“As mortgage rates move up there’ll be more consolidation, mergers and people leaving the business,” said Ray Morris, a director of business development at GMAC Mortgage Corp.’s servicing business. “We’re a scale business and companies that do large-scale business survive.”
More than half the loans made directly to consumers are arranged by loan brokers that work for approximately 8,500 lending companies or mortgage banks. The thinning in the industry’s ranks is expected in all levels, particularly brokers who were attracted to the industry by its rapid growth.
