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64 stration of leadership and vision, depth and breadth of assets, investments toward continu- ous improvement, and even cultural fit." A CHANGING LANDSCAPE Unfortunately, not even the shiniest of technological innovations or the cleverest of effi- ciency boosts can help if there just aren't enough homes available in the market. Inventory short- ages have become a serious thorn in the side of the mortgage and real estate industry in 2017, and our experts don't see that issue vacating the premises anytime soon. Even if 2018 is lighter on the natural disasters than 2017 has been, in- ventory shortages will remain a problem without an easy solution going forward. Moreover, it's a problem that's already reshaping parts of the market, driving many potential homebuyers toward the rental market instead. Alanna McCargo, Housing Finance Policy Center (HFPC) at the Urban Institute, said, "Our national housing inventory is already deficient, it's old, and is not being constructed quickly enough to meet demand. e shortage of affordable rental properties and homes to buy puts pressure on home prices and rents, driving them higher. is is a trend that will persist for the foreseeable future, absent significant policy changes and support for construction of and capital investments in the affordable housing stock." McCargo points out that single-family rentals now account for 35 percent of the coun- try's 44 million rental units. at's up from 31 percent in 2006. "is is a notable shift for the housing mar- ket," said McCargo. In spite of inventory shortages, many experts expect the general shift away from the refinance boom and toward a more purchase-oriented environment to continue. Burch said, "For the first time in 10 years, we may be on the last leg of a low-rate environment. is likely spells the end of a historical refi wave, so I would expect to see some firms struggle with having to reorient themselves to a purchase market." Wall said, "One of the biggest shifts is the move from a refinance-dominated market to one that is more balanced with home equity and purchase transactions. We expect this trend to continue as interest rates keep rising and programs like the Home Affordable Refinance Program (HARP), diminish, reducing demand for refinance transactions. We're also seeing stability in the default market." One key issue shaping the landscape is credit availability. "Consumers have insufficient access to credit, which is hampering homeownership opportunity as we enter the tenth year since the housing crisis," McCargo said. "e government channels have been largely supporting all lend- ing in the U.S. for the past decade, and we have seen a period of stability, while credit remains tight for families who are ready to buy a home and need access to financing." However, a tighter credit landscape has some obvious benefits, especially on the default servic- ing side. "ere has been less risk in the market when it comes to generating loan products, resulting in fewer defaults and problem assets than are now in the market and in the investors' portfolios," said Vella. "ere's been a shift of emphasis in risk management, compliance, and innovation. ere's also been extreme prioritiza- tion to automate processes, reduce timelines, and utilization of data and analytics to manage margin compression." e industry will also be carefully watch- ing to see what happens with interest rates and tax changes. Sanjiv Das, CEO of Caliber Home Loans, points out that, even if interest rates trend upwards, mortgage rates continue to remain at, or close to, historic lows. On the tax front, plenty of questions and uncertainty are destined to arise in the aftermath of the U.S. House of Representatives passing its tax-reform bill in November 2017. Das told DS News, "It's difficult to know with certainty what the final package will look like, and while there may be some impact if mortgage interest deductions are modified, we believe the overall impact will be relatively minor and may only affect a relatively small number of high-priced markets." Burch sees the retreat of large depository banks from the mortgage game as having one unquestionable impact on the state of things: a surge in innovation. "e monoline independent mortgage lenders that have taken the market share left by the banks have been innovating at a blistering pace and it's hard to imagine that occurring if the traditional players were more active." Nagai suggests that tumultuous shifts in product features, underwriting standards, cus- tomer expectations, and the legal and regulatory environment have been postive for the industry. "is has created a simplified mix of products, consolidation across banks, nonbanks, and service providers, and an overall improvement in credit quality. It has also driven innovation in new services and capabilities aligned with the digital, omni-channel world," Nagai said. Dahlstrom also sees enormous potential for loan companies to play a more important role in customers' lives when it comes to tapping into their home equity. Dahlstrom explained, "U.S. homeowners have $14 trillion dollars in home equity, yet continue to rack up half a trillion dollars a year in debt, mostly in the form of student loans and credit card debt. By tapping home equity to rebalance debt, homeowners can reduce their monthly payment burden and relieve financial stress." THE ROAD AHEAD Like the old saying goes, plan for the worst while hoping for the best. With so many factors to consider as 2018 rolls closer, we also asked our panel of experts what they hope for in 2018. For Mr. Cooper's Dahlstrom, it comes right back around to where we started: embracing the digi- tal. "We hope that 2018 becomes the year of the digital mortgage," Dahlstrom said. "Even today, the huge majority of mortgage originations are laden with paperwork and manual processes, which creates cost, complexity, and delays for everyone. ere has been lots of talk about a more automated digital origination experience, but adoption has not reached scale." Altisource's Vella suggests that coming to grips with the Federal Housing Administra- tion loan process will be important on both the origination and servicing side. "It has been a challenge for some originators and servicers due to the growing size of their portfolio to manage the risk and requirements that come along with originating and servicing FHA loans." While we can certainly hope that 2018 is less active when it comes to natural disasters, it's essential that the industry learn from the aftermath of California's ravaging wildfires and the brutal hurricane season. e HFPC tracked how communities were affected by the disasters, including increased demand for construction and disaster relief from government agencies and the mortgage industry. "We looked at par- ticularly hard-hit large metro areas, like Hous- ton, which endured massive economic loss," said McCargo. "ere will be future disasters, so we should reflect on the lessons we learn from each disaster, understand the impact and data, and carry these lessons forward into planning for resilient communities in the future." Overall, many engender optimism for 2018. As Caliber's Das put it, "We are encouraged by the overall continued growth in the market." With the purchase market aiming at a resurgence and technology offering abundant opportunities for working smarter and more efficiently, 2018 could be a banner year for the industry—so long as it continues to evolve with the times.

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