Lending industry leaders surveyed by Fannie Mae identified a lack of housing supply as the biggest risk factor in 2024, but most expected refinancing to increase next year if interest rates continue to fall.
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Nearly two-thirds of mortgage lenders will cut jobs in 2023, but most lenders expect to maintain or increase their workforce this year, according to a survey of more than 200 senior executives by mortgage giant Fannie Mae. .
While the survey found that two-thirds of mortgage industry executives believe the U.S. economy is likely to enter a recession within the next two years, that was down from 93% a year ago.
Lending industry leaders see a lack of housing supply as the biggest risk factor in 2024, but a majority (64%) expect a new wave of mortgage refinances this year or next if interest rates continue to fall.
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Doug Duncan
Summarizing the findings, Doug Duncan, Fannie Mae’s chief economist, wrote that “after laying off staff in 2023, lenders are generally less pessimistic about the direction of the economy and the mortgage market, and staff sizes appear to be normalizing,” at their lowest level since 2014. the lowest level.
“Mortgage activity is likely to reach its lowest post-pandemic levels after an era of historically high mortgage purchase and refinancing volumes,” Duncan wrote. “As such, we believe that if the housing market’s slow recovery continues into this year With time remaining until 2025, some mortgage lenders are now preparing their workforces to meet potential increases in mortgage originations.”
The Fannie Mae Mortgage Lender Confidence Survey, conducted in early May and released this month, collected responses from 215 senior executives at 198 lenders, including mortgage banks, depository institutions and credit unions. View.
Mortgage Lenders’ Top Business Priorities
Source: Fannie Mae Mortgage Sentiment Survey, July 2024.
“Talent management and leadership” is the top priority for most executives, followed by cost cutting and streamlining business processes.
“Talent retention is a top priority,” an executive at a large institution told Fannie Mae. “We hope to retain our high-performing LO (loan origination) team and continue to seek new talent to join our organization. We are in growth mode for the foreseeable future.
Fannie Mae defines large institutions as those with more than $245 million in loan originations in 2023.
While 62% of mortgage executives said they laid off staff last year, 54% said they expected staffing to remain at last year’s levels in 2024, while 28% expected to add staff this year.
Cutting costs and streamlining business processes became top priorities for mortgage executives last year as mortgage rates climbed above 7%, reaching levels not seen in more than two decades.
An executive at a mid-sized institution with between $46 million and $245 million in funding said business process simplification remains a priority, with lenders moving to cloud-based systems “to minimize new product rollouts and streamline staff and The Process for Members” to seek a loan. “
New products and services were a top priority for a quarter of executives surveyed, with one leader at a smaller institution (with originations under $46 million) saying, “Traditional loan originations have declined significantly over the past 18 months, and we We are considering other loan disbursement methods.” There are many ways to make money, whether it’s a new product or a different service. “
Investments in consumer-facing technology — a top priority for lenders in 2019 — failed to crack the top three priorities for the third year in a row.
Lenders less certain about recession over next two years
Source: Fannie Mae Mortgage Sentiment Survey, July 2024.
Mortgage executives believe a recession is more likely than average over the next two years, but only 19% think a recession is “very likely,” down from 57% a year ago. Nearly half of lending industry leaders (48%) still believe a recession is “likely.”
Scarcity of housing supply was the risk factor most cited by mortgage executives (64%), followed by changes in mortgage rates (59%), household debt levels (35%) and house prices (31%).
Fannie Mae economists warned last year that Fed tightening could lead to a recession, but backed off that warning in January.
In a June forecast, Fannie Mae’s venerable Economic and Strategic Research (ESR) group forecast that purchase mortgage loan originations will grow 14% next year to $1.5 trillion, while 30-year fixed-rate loans It will drop to 6.3% by the end of next year.
Economists at Fannie Mae predict even more dramatic growth in refinancing next year, with refinancing volume rising 46% to $544 billion.
Two-thirds of mortgage executives surveyed by Fannie Mae expect a refinancing boom. While only 6% think that will happen this year, 26% expect refinancing to pick up in the first half of next year, and 32% plan to start the refinancing boom in the second half of 2025.
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