1. Financial Technology (or fintech) lenders are quickly becoming the most preferred lenders by consumers looking for mortgages
Fintech lenders use technology to improve customer experience, drive down overhead costs, and offer more affordable mortgage products to borrowers.
While fintech offers many benefits, it also poses some risks. The fintech industry is less regulated, which means fintech lenders tend to be more flexible than traditional mortgage lenders when it comes to borrower qualifications. By offering loans to borrowers with lower credit scores, higher debt-to-income ratios, and loans as low as zero down, fintech lenders may have a hand in driving the next housing bubble. While fintech lenders are making home ownership more affordable for some borrowers, it remains to be seen how this new lending methodology will affect the broader housing market. Some suggest that if regulations are not tightened on the fintech industry, we could see a repeat of the lending practices, which led to the
2007 subprime mortgage crisis.
2. Mortgage servicers should expect default-servicing expenses to increase in 2023
The national emergency is set to end on May 11, 2023. Therefore, homeowners currently in jeopardy of defaulting on their mortgages will no longer have the option to initiate COVID-19-related forbearance.
The end of this forbearance program closes a chapter on the most dependable tool in keeping mortgage default rates at record lows over the past three years. The recent MBA monthly loan monitoring survey revealed that the total number of loans now in forbearance has reached its lowest levels since they were rolled out to combat the effects of the COVID-19 pandemic. With the possibility of a recession due to rising inflation and interest rates, consumers have one less tool to fight a shrinking budget, and mortgage defaults are likely to rise.
3. Mortgage servicers need to gear up to face increasing regulatory oversight given the looming fears of another foreclosure crisis
As the COVID-19 emergency ends, mortgage servicers will expand default servicing, and begin to engage in more aggressive loss mitigation practices to keep homeowners out of foreclosure. These practices will inevitably bring increased scrutiny upon servicers by regulators. In 2023, it will be key to stay hyper focused on compliance by identifying risks, paying close attention to updates from the
Consumer Financial Protection Bureau (CFPB), and engaging in proactive self-examination to ensure the level of compliance needed to defend these business practices.
Our team is constantly monitoring these topics. If you have additional questions, connect with
Ben at any time.
This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.