Lending trade leaders surveyed by Fannie Mae see the dearth of housing provide as the most important danger think about 2024, however most count on refinancing to select up subsequent 12 months if charges proceed to fall.
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Practically two out three mortgage lenders trimmed their workforces in 2023, however most lenders count on to both preserve or develop their payrolls this 12 months, in response to a survey of greater than 200 senior executives by mortgage big Fannie Mae.
Whereas the survey discovered two-thirds of mortgage trade executives assume it’s possible the U.S. financial system will tilt right into a recession throughout the subsequent two years, that’s down from 93 % a 12 months in the past.
Lending trade leaders see the dearth of housing provide as the most important danger think about 2024, however most (64 %) count on a brand new mortgage refinance increase to kick off this 12 months or subsequent if charges proceed to fall.
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Doug Duncan
“After job cuts in 2023, and with lenders typically much less pessimistic concerning the financial system and the route of the mortgage market, workers sizes look like normalizing” on the lowest stage since 2014, Fannie Mae Chief Economist Doug Duncan wrote in summarizing the survey’s findings.
“Mortgage exercise possible hit a post-pandemic flooring following that period’s traditionally excessive mortgage buy and refinance volumes,” Duncan wrote. “In consequence, we consider some mortgage lenders at the moment are getting ready their workforces to fulfill potential progress in mortgage originations ought to the sluggish restoration of the housing market proceed via the remainder of this 12 months and into 2025.”
Performed in early Might and launched this month, Fannie Mae’s Mortgage Lender Sentiment Survey gathered views from 215 senior executives at 198 lenders, together with mortgage banks, depository establishments and credit score unions.
Mortgage lenders’ high enterprise priorities
Supply: Fannie Mae Mortgage Lender Sentiment Survey, July 2024.
“Expertise administration and management” was the highest precedence for many executives, adopted by cost-cutting and enterprise course of streamlining.
“Retention is high of thoughts,” an government at one giant establishment informed Fannie Mae. “We need to retain our LO (mortgage originations) group that’s performing in addition to proceed to scout for brand new expertise to affix our group. We’re in progress mode for the foreseeable future.”
Fannie Mae defines giant establishments as having greater than $245 million in 2023 mortgage origination quantity.
Whereas 62 % of mortgage executives mentioned they minimize their workforce final 12 months, 54 % mentioned they count on 2024 staffing to remain about the place it was final 12 months, whereas 28 % count on to workers up this 12 months.
Final 12 months, as mortgage charges have been climbing previous 7 % to ranges not seen in additional than twenty years, cost-cutting and enterprise course of streamlining have been mortgage executives’ high two priorities.
An government at a mid-sized establishment with between $46 million and $245 million in originations mentioned enterprise course of streamlining stays a high precedence, with the lender migrating to a cloud-based system “to attenuate new product introductions and streamline the method for workers and members looking for a mortgage.”
New services have been a high precedence for one in 4 executives surveyed, with a pacesetter at a smaller establishment (lower than $46 million in originations) saying that “Conventional mortgage origination has decreased a lot the final 18 months, we’re different varieties of methods to earn a living, be it new merchandise or totally different companies.”
Investments in consumer-facing know-how — the highest precedence for lenders in 2019 — did not crack the highest three priorities for the third 12 months in a row.
Lenders much less sure of a recession in subsequent 2 years
Supply: Fannie Mae Mortgage Lender Sentiment Survey, July 2024.
Mortgage execs assume the chances of a recession within the subsequent two years are higher than even, however solely 19 % assume a recession is “very possible,” down from 57 % a 12 months in the past. Near half of lending trade leaders (48 %) nonetheless consider a recession is “considerably possible.”
Scarce housing provide was the danger issue cited most frequently (64 %) by mortgage executives, adopted by mortgage charge modifications (59 %), family debt stage (35 %) and residential costs (31 %).
Fannie Mae economists, who final 12 months have been warning that Fed tightening would possible result in a recession, backed away from that decision in January.
Of their June forecast, Fannie Mae’s extremely regarded Financial and Strategic Analysis (ESR) Group forecast that buy mortgage originations will develop by 14 % subsequent 12 months, to $1.5 trillion, as 30-year fixed-rate loans will drop to six.3 % by the tip of subsequent 12 months.
Fannie Mae economists are predicting much more dramatic progress in refinancing subsequent 12 months, with refi quantity rising by 46 % to $544 billion.
Two-thirds of mortgage executives surveyed by Fannie Mae predict a refi increase. Whereas solely 6 % see that taking place this 12 months, 26 % count on refinancing to select up within the first half of subsequent 12 months, whereas 32 % are planning on a refi increase kicking off in H2 2025.
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