"But over the past two decades, the mortgage cycle has been bent out of all recognition. Years of artificially low interest rates flooded the market with borrowers who were not quite fit to buy a home. Then COVID moratoria kept them in those homes while investors waited to see a return. Inventory plummeted. What had been a dependable spinning cycle, rolling like a wheel into the future, was smashed flat."
"While much of the industry spent the last two years playing defense, cutting costs, downsizing teams, and waiting for rates to come back, the nation's largest mortgage servicers and independent mortgage banks never stopped marketing. They never stopped communicating with borrowers. And they certainly never stopped positioning themselves as the safest, simplest option when the market turns. As rates continue to ease, that gap is about to become painfully visible."
Mortgage lending historically follows predictable downturn-and-recovery cycles. Two decades of artificially low interest rates increased mortgage risk by welcoming marginal borrowers. COVID moratoria kept many marginal borrowers in place and investors deferred selling, causing inventory to plummet and normal cyclical dynamics to break down. Falling rates will likely bring buyers and some refinance activity back, fueled by higher-rate loans originated in recent years. Many smaller lenders pared costs and paused marketing, while the largest mortgage servicers and independent banks sustained outreach and positioned themselves as safe, simple choices. Competitive positioning, not internal shortcomings alone, will determine which lenders capture returning demand.
Read at www.housingwire.com
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