We are just a few weeks into 2020, but already it is clear that many of the mortgage lender trends that defined 2019 will continue.
Interest Rate Reductions
It was common knowledge that the Fed would begin normalizing fiscal policy in 2019 by increasing interest rates. That never happened. In fact, the Fed lowered benchmarks throughout last year, and the economic conditions that motivated these policies still persist.
New borrowers cashed in on historically low mortgage rates, and current homeowners took advantage to kick off a refinance boom. Mortgage lenders will continue to reduce their rates as the Fed does, meaning another active borrowing season is likely for the remainder of the year.
Cash-Out Mortgage Refinancing
Homeowners capitalized on low rates with cash-out refinancing, swapping existing mortgages for mortgages worth more and pocketing the cash or using it to fund a home improvement project or pay off debts. This trend is likely to continue, though starting September 1st, the amount of home equity borrowers can pull out of a cash-out refinance will be reduced to 80% of the home’s value or less.
Short Mortgage Terms and Low Rates
Homeowners that have enough equity to make a large lump-sum payment toward the balance of their mortgage can take advantage of mortgage recasting, when lenders re-amortize the mortgage at a lower rate in exchange for a shortened loan term. It’s likely that many homeowners will recast their mortgages this year.
Monthly Mortgage Insurance
When buyers pay less than 20% of the home’s value as a down payment, they are often required to have private mortgage insurance, or PMI. Improving economic conditions and lowered interest rates have allowed many borrowers to develop the healthy payment history needed to cancel their PMI, and many will take advantage.
Despite the loose lending standards in 2019 thanks to stimulative fiscal policy, borrowers were relatively conservative. Unlike 2008, when anyone and everyone was borrowing more and more because they could, the last several years have seen for more responsible lending habits become the norm. That is likely to continue in 2020, especially as talk of an impending recession becomes more loud.
Lakeside Title Company Streamlines Work for Lenders
With forecasts calling for a busy year thanks to these mortgage lender trends, you’ll need to focus on acquiring customers and following up with leads. Lakeside Title Company can help by taking the paperwork off your desk. We cater to the finance community, whether you’re a credit union or a bank, by streamlining the refinance title and closing processes.