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It’s a rough time to be a small mortgage firm.
The companies are cutting staff, shutting down and trying to sell themselves. It’s yet another sign of increasing pressure on the housing market due to rising interest rates and the maturation of a long economic expansion, according to the Wall Street Journal.
The number of nonbank mortgage lenders dropped by around 3.5 percent halfway through 2018 when compared to the end of 2017, and mortgage-loan-originators at the companies declined by more than 11,000, according to the Conference of State Bank Supervisors.
Relying heavily on mortgage refinancings, nonbank lenders had grown for several years prior to this, taking mortgages away from traditional banks by being able to move faster and occasionally having a better knowledge of the local markets. Industry experts now expect their ranks to continue shrinking moving forward, given that rising interest rates will continue to make it more expensive to buy a home and dry up the mortgage refinancing business.
Housing sales are slowing down as well thanks to concerns about affordability and increasing prices for labor and materials, which is slowing down the number of projects going forward.
Lenders are trying to navigate the new landscape using tactics like selling their mortgage-servicing rights or lending to borrowers they would have previously overlooked. Dan Gilbert, chairman of the largest nonbank lender Quicken, told the Journal that purchase mortgages are becoming more central to the company’s business.
“Rising rates are headwinds to us,” he said. “When rates go low, there are tailwinds. But either way the plane has to fly.” [WSJ] – Eddie Small
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