January 12, 2021

Flourishing in Uncertainty

Issues Facing Originators

“To expect the unexpected shows a thoroughly modern intellect.”

– Oscar Wilde (1893)

As an industry, we’re fortunate to start 2021 with economists predicting a solid year ahead for housing — with Realtor.com forecasting a 7% increase in existing home sales over 2020.

It’s also a good exercise to look back at the prognostications for the past 12 months — and how those housing market forecasts were upended by the COVID-19 pandemic.

In October 2019, the Mortgage Bankers Association (MBA) predicted total mortgage originations in 2020 would decline by 8%, led by a 24.5% decline in refinance activity.

What actually happened in 2020? Defying forecasts, mortgage originations increased by 50% to a record $3.39 trillion as historically low mortgage rates of about 3% (and sometimes less) lifted mortgage refinances by 91.5%, according to a November MBA announcement.

Of course, the full story of housing’s V-shaped recovery is more complicated. Home sales dropped sharply in March at the start of the pandemic before beginning a steady ascent as many families sheltering in place sought properties with more space — including bigger yards and room for home offices, exercise equipment and remote learning.

For mortgage originators, the early part of 2020 must have been like riding a rollercoaster as they suddenly transitioned from what had been mostly in-person and phone contacts with borrowers to serving homebuyers in an entirely new way — remotely via Zoom and other videoconferencing apps.

The rapid adoption of these tools by loan originators is a powerful example of the importance of resilience and flexibility in a housing market that often defies expectations, though rarely as dramatically as in 2020.

When market conditions change, the ability to pivot rapidly and offer viable solutions to meet those changed circumstances is crucial to survival. For example, Arch MI responded to 2019’s historically low interest rates with the RateStar Refinance Retention program. As COVID-19 dominated 2020’s market environment and rates plunged to new record lows, the program was rereleased to help lenders compete for the massive wave of fresh refinance business.

With the RateStar Retention Refinance program, lenders can offer eligible borrowers who refinance Arch MI-insured mortgages a reduced monthly borrower-paid MI premium on their new insured loans. Unique in the industry, the program’s additional MI savings enable lenders to close more refinanced loans while helping borrowers lower both their monthly mortgage payments and MI premiums.

We’re proud Arch MI was recognized as Ellie Mae’s 2020 winner of the Lenders’ Choice award for Innovative Service Provider for our RateStar Refinance Retention program.

Our refinancing tool also builds on the success of Arch MI’s first-in-the-industry RateStar BuydownSM tool for customizing the MI premium payment for each borrower. Introduced in 2018, RateStar Buydown allows lenders to experiment with different combinations of upfront and monthly payments in order to arrive at the perfect solution for every homebuyer’s needs.

Like RateStar Refinance Retention, Buydown gives lenders another tool for closing more loans and collecting more referrals by offering something the competition can’t beat a unique MI buydown tailored to individual borrowers.

As we look ahead, it’s impossible to know how much interest rates will climb or whether 2021 will set more home sales records. No doubt, there will be surprises in the months ahead. Arch MI is committed to leveraging the latest technology to invest in market innovations that can make a huge positive difference for lenders in almost any type of housing market.

We’d love to hear how you’ve responded to 2020’s surprises and your predictions on what 2021 could bring. Send us an email describing the market conditions you’re planning for in the months ahead and any changes you’re making to adapt to a market that’s distinctly different from the way things were just over 12 months ago.

More in: RateStar, Refinancing