Lending trade leaders surveyed by Fannie Mae see the dearth of housing provide as the largest danger think about 2024, however most anticipate 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 anticipate to both preserve or develop their payrolls this 12 months, in keeping with a survey of greater than 200 senior executives by mortgage large Fannie Mae.
Whereas the survey discovered two-thirds of mortgage trade executives suppose it’s probably the U.S. economic system will tilt right into a recession inside the subsequent two years, that’s down from 93 p.c a 12 months in the past.
Lending trade leaders see the dearth of housing provide as the largest danger think about 2024, however most (64 p.c) anticipate 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 generally less pessimistic about the economy and the direction of the mortgage market, staff sizes appear to be normalizing” on the lowest degree since 2014, Fannie Mae Chief Economist Doug Duncan wrote in summarizing the survey’s findings.
“Mortgage activity likely hit a post-pandemic floor following that era’s historically high mortgage purchase and refinance volumes,” Duncan wrote. “As a result, we believe some mortgage lenders are now preparing their workforces to meet potential growth in mortgage originations should the slow recovery of the housing market continue through the rest of this year 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’ prime enterprise priorities
Supply: Fannie Mae Mortgage Lender Sentiment Survey, July 2024.
“Talent management and leadership” was the highest precedence for many executives, adopted by cost-cutting and enterprise course of streamlining.
“Retention is top of mind,” an government at one massive establishment informed Fannie Mae. “We want to retain our LO (loan originations) team that is performing as well as continue to scout for new talent to join our organization. We are in growth mode for the foreseeable future.”
Fannie Mae defines massive establishments as having greater than $245 million in 2023 mortgage origination quantity.
Whereas 62 p.c of mortgage executives mentioned they reduce their workforce final 12 months, 54 p.c mentioned they anticipate 2024 staffing to remain about the place it was final 12 months, whereas 28 p.c anticipate to workers up this 12 months.
Final 12 months, as mortgage charges had been climbing previous 7 p.c to ranges not seen in additional than 20 years, cost-cutting and enterprise course of streamlining had been mortgage executives’ prime 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 prime precedence, with the lender migrating to a cloud-based system “to minimize new product introductions and streamline the process for employees and members seeking a loan.”
New services had been a prime precedence for one in 4 executives surveyed, with a frontrunner at a smaller establishment (lower than $46 million in originations) saying that “Traditional loan origination has decreased so much the last 18 months, we are looking at other types of ways to make money, be it new products or different services.”
Investments in consumer-facing know-how — the prime 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 suppose the chances of a recession within the subsequent two years are higher than even, however solely 19 p.c suppose a recession is “very likely,” down from 57 p.c a 12 months in the past. Near half of lending trade leaders (48 p.c) nonetheless imagine a recession is “somewhat likely.”
Scarce housing provide was the danger issue cited most frequently (64 p.c) by mortgage executives, adopted by mortgage fee modifications (59 p.c), family debt degree (35 p.c) and residential costs (31 p.c).
Fannie Mae economists, who final 12 months had been warning that Fed tightening would probably 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 p.c subsequent 12 months, to $1.5 trillion, as 30-year fixed-rate loans will drop to six.3 p.c by the tip of subsequent 12 months.
Fannie Mae economists are predicting much more dramatic development in refinancing subsequent 12 months, with refi quantity rising by 46 p.c to $544 billion.
Two-thirds of mortgage executives surveyed by Fannie Mae expect a refi increase. Whereas solely 6 p.c see that taking place this 12 months, 26 p.c anticipate refinancing to select up within the first half of subsequent 12 months, whereas 32 p.c are planning on a refi increase kicking off in H2 2025.
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