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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 30 December 2023 C O V E R S T O R Y Sandra Madigan, EVP of Product Strategy– Servicing Technology, ICE Mortgage Technology: Mortgage forbearance programs established to aid homeowners through the COVID-19 pandemic will wind down in 2024. In response, new initiatives aimed at providing continued support for homeowners will likely be introduced by entities such as the FHA, VA, Fannie Mae, Freddie Mac, and HUD. Concurrently, I expect to see regulators update loss mitigation strategies to keep people in their homes. A housing inventory shortage will con- tinue exacerbating affordability challenges, especially for first-time homebuyers. The demographic landscape is undergoing a notable transformation, with many emp- ty-nester baby boomers now contemplating downsizing. Leveraging their accrued equi- ty, older homeowners may gravitate towards smaller starter homes—the very segment that Generation Z aspires to enter as first- time homeowners. This intergenerational dynamic will compound the challenge of providing affordable housing options for new entrants into the market. It will also create an opportunity for lenders to help older homeowners put their equity to work. Michael Merritt, SVP, Mortgage Default Servicing, BOK Financial: I think we will continue to see volatility in the housing market, driven by higher interest rates and low inventory. Affordability will continue to be a headwind for the industry in 2024. Higher rates impact origination volumes and options and present challenges in the loss mitigation space. Another potential headwind is an increase in defaults from macroeconomic factors. Servicers are prepared to meet this challenge and help homeowners with assistance options. Stanley C. Middleman, President and CEO, Freedom Mortgage: My overall impressions, looking out at 2024, are as follows: There will be minimal changes next year. I expect most of the year will look and feel like this year. The first and second quarters should be the most challenging, with a little bit of pick-up at the end of Q2, and into Q3, during the buying season. Although it is widely anticipated that rates will be slightly lowered in 2024, I believe that the tangible impact of that rate change will not be significant. I would expect a return to last year's (2022) level, with the biggest positive in the second half of the year. This minor pick-up in origination will not greatly alter the impact on the general health of the originator marketplace. There is also some room for larger and more stable gains on sale numbers around securitization activity, but not enough to solve the existing excess capacity in the in- dustry. I am expecting the early vintages of servicing will continue their strong returns with continued subdued prepayment speeds, keeping the value of that servicing high throughout the year. All in all, 2024 should, industrywide, be a slightly better year than 2023. The wild card in this would be geopolitical impact beyond our current understanding. Jason Obradovich, Chief Investment Officer, New American Funding: Overall, the housing market will face varying degrees of challenges in 2024. Higher rates are certainly testing each geographic area unevenly. The markets that will thrive are those with a continued lack of supply and persistent demand. However, affordability remains a concern given the runup in prices over the past few years, coupled with much higher rates than we have seen in over a decade. One of the unintended consequences of the FOMC's recent actions is a situation where homeowners are effectively stuck in their current mortgage because the cost to move to another home at a much higher rate would be unaffordable, if not impossible. This has broken the housing market to a point where the normal supply of homes and exchange of homes is not happening. When you combine higher rates, record prices, a lack of supply that could last years, if not decades, with current home- owners' inability or unwillingness to sell, you have a broken housing market. Breaks are rarely even, and there will be markets that face many more challenges than others. Some markets that relied on somewhat weak demand during COVID-19 and/or rely on investor activity to push prices higher could see a weakening in prices if demand drops even a little bit. Meanwhile, other markets have suffered a shortage in supply for years before COVID-19 and do not rely on outside investors. Those markets will continue to see strong demand, with the only challenge being interest rates and affordability. Once the FOMC (Federal Open Market Committee) reverses policy and brings rates lower, those markets will certainly see price increases continue. At its core, the housing market is on a solid foundation, but dealing with some noise related to the current high level of interest rates that likely will be corrected in the next year or two. Lee Smith, Senior EVP & President of Mortgage, Flagstar Bank: I feel 2024 is going to continue to be a tough year for mortgage originations. Right now, Fannie Mae, Freddie Mac, and the MBA all forecast the market at more than $2 trillion, but I think that gets revised downward if rates stay higher for a longer period and the Fed continues to sell mortgage-backed securities (MBS) into the market. Capacity still needs to be right-sized across the industry, and I think the tougher market will force that to happen. Combine all of this with limited inventory, and it becomes a perfect storm. Toby Wells, President, Cornerstone Servicing: Even if interest rates ease, the total cost of homeownership will continue to rise due to inflation, rising property values amid low inventory, higher property taxes, and skyrocketing insurance premiums in some regions. With rising homeownership costs, combined with the end of COVID-era relief programs, mortgage delinquencies are expected to tick upward from the historic lows of 2023.