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Trends In The Lending Industry

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As we enter the second half of 2017, our industry continues to ride a wave of growth. With improving national and global economies, stock markets reaching record levels and the positive outlook in the job market, the real estate market is poised to continue riding this wave. With this post, we highlight some of the key trends that we’ll see in the second half of the year.

Millennials Are Becoming a Force

We’ve spent a lot of time talking about Millennials. And for good reason. As the largest generation since the baby boomers, it is the Millennials that will power the housing market for years to come. While their entry into the market was delayed, as we’ve discussed in earlier posts, now that they have started to buy homes they are flooding into the market. Currently accounting for 34% of home buyers, Millennials have quickly proven wrong those who just a few years ago thought this generation was not interested in purchasing homes. In fact, a recent survey found that 90% of Millennials were interested in owning their own home. This group of young, first time home buyers will continue to have a growing impact on the real estate industry throughout 2017 and beyond.

Refinances Continue to Dry Up

For the last couple of years, refinances have accounted for a smaller and smaller percent of the mortgage market. In 2016 and through February of this year, refinance mortgages accounted for around 40% of all mortgage loans. In March refinances began to fall and by May only accounted for 32% of all mortgages, a figure that remained unchanged in June. With the Fed expected to increase rates this fall, refinances will continue to account for a smaller percentage of the all mortgage loan market.

More Mortgage Applications Are Approved

We continue to see a high percentage of mortgage loan applications making it thorough to approval. According to Ellie Mae’s “Origination Insight Report”, the approval rate for all mortgage loan applications hovered right around 70% during the first 6 months of 2017. This is a sizable increase from the low 60% approval rate the industry experienced three short years ago. The cynic may claim that the growth in approvals is due to lenders relaxing credit requirements, however the average FICO score for closed loans has remained almost the same since 2014, ranging from 724 to 727. This would indicate that the increase can be attributed to more borrowers with better credit scores. As the overall economy continues to expand and the outlook for growth in the job market remains positive, it is expected that the percentage of approved mortgage loan applications will continue to grow.

Data Security Remains Center Stage

Data Security is not some much a trend but a way of life. Assuring that customers personal information is handled in a secure manner will be paramount to the long-term success of any mortgage lender. As we’ve commented before, those entities that do not have the proper security in place will at best be penalized by regulators or at worst have their customer’s personal data and funds stolen. As we move towards 2018, data security will continue to be at center stage for our industry.