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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 54 July 2024 E A B O U T L O O K EAB Outlook Members of MortgagePoint's Editorial Advisory Board share their insights into the trends and challenges shaping the industry landscape this month. Daren Blomquist VP of Market Economics, Auction.com In his role, Daren Blomquist analyzes and forecasts complex macro- and micro- economic data trends within the mar- ketplace and greater industry to provide value to both buyers and sellers using the Auction.com platform. Blomquist's reports and analysis have been cited by thousands of media outlets nationwide, including the Wall Street Journal, the New York Times, and USA TODAY, and on many national network broadcasts, including CBS, ABC, CNN, CNBC, FOX Business, and Bloomberg. Q: What industry risks are keeping you up at night? Blomquist: The persistent gap between actual home prices and affordable home prices based on historic price-to-income ratios. This gap has come down from its peak of around 30% in 2021, but it's still at more than 20%—meaning actual home prices are 20% higher than the historically affordable home prices. While a low sup- ply of housing has so far provided a cush- ion against this gap collapsing quickly in the form of a sharp home price correction, supply is slowly creeping back, and that leaves less cushion against a home price correction. Meanwhile, several looming threats could potentially pull out the cush- ion completely, including rising "hidden" homeownership costs of insurance and property taxes in many markets, rising delinquency rates for consumer debt such as credit cards and auto loans, and falling values and rising defaults in segments of the commercial real estate market. Q: What loss mitigation changes are you anticipating and preparing for in the months ahead, and how so? Blomquist: The pandemic disrupted the loss mitigation waterfall, mostly in good ways that benefit distressed homeowners, and we're now seeing the long-term impacts of that disruption play out. In the shorter term, leading up to the election, I don't expect major changes to loss mitigation programs unless there is a national or regional emergency that trig- gers emergency loss mitigation measures. Following the election, I would expect a gradual movement toward a more efficient loss mitigation process in which distressed homeowners move a bit more quickly to a final decision on what loss mitigation solution is the best fit for them. This trend toward a more efficient loss mitigation process would be welcome given that more time spent in the loss mitigation waterfall itself (without arriving at a solution) results in more lost equity for distressed home- owners. Our data clearly shows this lost equity phenomenon. Q: What is one area where servicing should be focused on innovating or improving, and why? Blomquist: Providing distressed home- owners with a graceful exit that preserves the maximum amount of equity in the property when no loss mitigation solution is a good fit for that homeown- er. This graceful exit, by definition, will involve a sale of the home, but it could incorporate flexible options that allow the homeowner to stay in the home for a period (i.e., lease back the property). Benjamin Gottheim VP, Servicing Policy, Single-Family Portfolio & Servicing, Freddie Mac Gottheim: Benjamin Gottheim joined Freddie Mac in 2010 after spending several years purchasing and servicing nonper- forming loans in the private market. He spent his first couple of years at Freddie Mac managing its foreclosure and bank- ruptcy portfolio and since 2013 has been responsible for servicing policy at Freddie Mac. In his current role, he oversees the team responsible for creating sound ser- vicing policies through the use of the Sell- er/Servicer Guide and TOBs. He and his team often work with FHFA and FNMA to create aligned servicing policies that are designed to promote better outcomes for borrowers and more efficient servicing practices and cost reductions.