Editor's note: This story originally appeared in the December edition of MReport.
The mortgage and housing industries are always evolving—developing advanced technology, discovering new ways to engage with consumers, adapting to shifts in the economy. Change is inevitable, and it happens every year and in every industry. However, those working in residential lending and housing faced unprecedented challenges in 2020.
When the World Health Organization officially categorized COVID-19 as a pandemic back in March, it seemed as if the entire world paused. Businesses closed their doors—some temporarily and some permanently—as stay-at-home orders took place across the country. Almost every aspect of work and life seemed to change overnight.
Somehow, the housing industry became acclimated to the new reality COVID-19 had created. More than that, it became stronger. Housing professionals have adapted to working remotely, engaging with consumers online, maximizing technology, and staying in tune with rapidly evolving economic trends. As the year comes to a close, industry leaders reflect on the takeaways of 2020 and look ahead to what challenges may lie ahead in 2021.
Going Remote and Staying Engaged
One of the largest hurdles that housing industry professionals had to confront this year was how they would continue to work remotely. Keeping up with morale, avoiding burnout, and being flexible with employees’ work-from-home environments were vital for industry leaders to transition to remote work as smoothly as possible this year.
Suzy Lindblom, COO of Planet Home Lending, says that she has encouraged managers at the company to find ways to maintain a steady stream of communication with their teams—even though they aren’t able to do so face-to-face.
“That’s the biggest thing, I think, that people miss,” Lindblom said. “Everybody’s home and you can’t pop into a cubicle or hop into an office to talk to each other. People feel lost without that human interaction. I encourage every one of my managers to do virtual meetings. They don’t have to do it every time, but they should do it at least once a month, twice a month, or more to engage with their employees. I think with that virtual interaction, employees feel more a part of the team and collaboration.”
While working remotely has plenty of challenges, it has also presented plenty of opportunities for companies in the mortgage and housing industries. Stanley Middleman, CEO of Freedom Mortgage, says that, in many ways, working from home has made it easier for industry professionals to help more people achieve homeownership.
“It takes all the boundaries down,” Middleman said about working remotely. “We don’t have to worry about parking spaces, and we don’t have to worry about desks and windows and space. And those physical limitations held us back from fulfilling our mission, which is fostering homeownership and helping people have the ability to leverage their homes to build personal and family wealth.”
He adds that despite obstacles, working from home “allows us to do our job and bring the liquidity that’s available in the marketplace to the consumer. And that’s what we’ve done a great job of.”
The Changing Needs of Consumers
Those working in the mortgage and housing industries aren’t the only ones whose lives look a bit different in 2020. Americans seeking home loans, refinancing, or help with forbearance plans have all undergone significant changes this year, and their needs have also shifted.
The CARES Act, signed into law on March 27, 2020, provided some much needed financial assistance to the American public. However, many people continue to face unemployment, lost wages, and financial distress, leading to a rise in forbearance. This has been incredibly difficult for those who were already struggling financially before the economic downturn caused by the coronavirus.
Stanley Middleman says he believes the mortgage lending industry has stepped up this year to help Americans in forbearance.
“We are very heavily involved serving the underserved communities through the FHA and as well as the veterans community. Essentially, we are responsible for the payments of our customers in forbearance,” Middleman said. “We’ve provided forbearance back in March for a lot of folks—even more since April. And it’s a big deal, we take it seriously because it’s a big responsibility.”
Tendayi Kapfidze, Chief Economist at LendingTree, says that COVID-19 also impacted consumers’ demand for purchase loans and refinancing.
“With COVID-19 early in the year, we saw a drop-off in demand for purchase loans,” Kapfidze said. “But because interest rates were declining as a result of COVID-19, and as a result of the Fed intervention in the markets, we saw a strong increase in refinances early in the year which has persisted throughout the year.”
Kapfidze says that toward the middle and end of 2020, there has been a rebound in some of that purchase activity, as consumers began to take advantage of the low rates. Those who chose to search for a home to purchase this year faced a competitive market. Home prices rose, and many homes on the market faced bidding wars this year. Demand for homes intensified because of record-low interest rates—another economic side effect of the coronavirus pandemic.
“Consumer interest in home-ownership right now is fueled by record low-interest rates, which are indirectly or directly, depending on how you look at it, an effect of COVID-19,” said Kurt Johnson, the Chief Credit Officer at Mr. Cooper.
He adds that what potential buyers are looking for in their homes has also changed this year. “The shift to remote work has certainly changed what people are looking for,” Johnson said. “We track purchase loans density. And by density, I mean how many residents are in every square mile. We have seen a shift from very high dense urban populations to suburban populations, which are slightly less dense.”
While Johnson notes that this shift to a greater interest in suburban homes has not been enormous, it is a noticeable change among consumers this year. An increase in work-from-home situations is likely one cause of the growing interest in suburban housing. People do not have to be concerned with commuting to the city to work at centrally located offices. Johnson also says that homebuyers are looking for more square footage, another perk of the suburbs. This makes sense as more families work from home or go to school remotely; they have started seeking out more space in their homes to set up an office.
If there is one major takeaway from 2020 that people working across all industries can agree on, it is the value of technology in day-to-day processes. In the mortgage and housing industry, new technologies and digital tools have helped traditional processes adapt to COVID-19 challenges and make things run smoother at every step of the home buying and selling process.
New apps and improved online services have helped keep the mortgage and housing industries running in 2020. This year included the launch of Inspex, a consumer-led inspection mobile application. Inspex is the brain-child of Xome, an end-to-end provider of real estate solutions that provides data enhanced and technological solutions products to companies working in the origination and servicing of mortgage loans.
“The use of the tool is to avoid having an appraiser find time to schedule an appointment with the customer, and then having the customer let this third party they don’t know come into the house. With this application, we can actually deliver a link to the consumer and it leads them through a fairly easy step-by-step process of quickly taking exterior and interior photos on their own and then deliver them back to the lender,” explains Mike Rawls, CEO of Xome.
This is just one example of technological innovations that have given the housing and mortgage industries an edge this year. By using digital tools and avoiding traditional ways of performing processes like appraisals that generally involve face-to-face interactions, consumers are kept safe from potential COVID-19 exposure. They are still able to go about the necessary steps in buying or selling their home.
Many consumers looking to buy homes were able to conduct their searches virtually. Traditionally, many potential homebuyers hire real estate agents to aid in their search and would tour homes in person before making a final decision. However, the home searching process has become more web-friendly than ever before. This year, consumers could guide themselves through home tours online using 3D tours and online home search engines. While these digital tools existed already, they proved to be all the more useful during a pandemic.
“At the same time when we had kind of digital mortgage experiences happening, we also know that many Realtors, and other parts of the industry, also went digital,” says AJ Barkley, Neighborhood Lending Executive at Bank of America. “There was a lot more on the books and a lot more people doing virtual tours of their properties and their homes and finding ways to be still able to realize the beauty, the wonder of homeownership.”
Barkley also says that people looking to refinance their homes have been able to do so through digital mortgage experience on apps and online resources. Like many companies with ties to the housing and mortgage industry, Barkley says Bank of America provides consumers with online resources and tools like affordability calculators for potential home buyers and educational tools such as the First-Time Homebuyer Online Edu-Series. There is no doubt that the new challenges the housing and mortgage industries have faced in 2020 have pushed them to develop innovative digital resources and tools for consumers to help the home buying and selling process run smoothly.
Economic Trends Impacting the Industry
More advanced technologies and online tools aren’t the only trends that have altered the mortgage and housing industry in 2020. One economic shift that has impacted consumers’ eligibility for home loans is the gig economy’s rising popularity.
Those who work in the gig economy or who are self-employed have faced difficulty applying for loans. Some continue to struggle to provide the right material to lenders to see their income and eligibility. As these types of consumers become more common, lenders are finding ways to work with them and provide some flexibility to help more gig economy workers and those who have “temp” income secure the loans they need to become homeowners.
“It’s about educating your loan officers and your internal staff, your processors and underwriters, on what it takes to qualify temp income,” Suzy Lindblom said about what it will take to help more gig economy workers along the path to homeownership. “It comes to education and experience. And you need that consistency, and that temp income, you need the tax returns just like you would for a self-employed consumer. And I do think as non-QM products come back that that will help too because it’s geared for those borrowers that don’t fit into the mold.”
Another economic trend that has led to changes in the housing industry this year is the rise in consumers’ credit scores. Despite the overall economic downturn that the United States has had to battle within 2020, many Americans’ credit scores improved due to government assistance and stimulus checks.
“A lot of people took some of that money and used it to pay off debt,” Tendayi Kapfidze said. “So, credit scores for a lot of people have gone up. And then, in other types of credit, like credit cards or personal loans, a lot of financial institutions gave relief to their borrowers in terms of requirements around payments. So all those things have boosted credit scores.”
Of course, this increase in credit scores means that more consumers may become eligible for home loans. First-time buyers, especially millennials who are at the peak time in their lives for buying homes, may leap into pursuing homeownership. However, Kapfidze emphasizes that this economic trend might be a mirage of the government stimulus checks. If this assistance doesn’t continue in 2021 and economic recovery slows, peoples’ financial positions and their credit scores may falter, once again limiting consumers’ ability to purchase a home.
What Experts Expect in 2021
While industry experts may feel uncertain about whether or not some of 2020’s economic trends will carry into 2021, there are other forecasts for next year that experts can expect with more certainty.
One significant change in the mortgage and housing industry that likely isn’t going away in 2021 is working remotely. Suzy Lindblom says that although there are members of the workforce who may want to return to work and maintain more separation between work and home, many companies, especially in the mortgage industry, will likely allow their employees to continue working remotely.
“I think it helps us because we’re not set on hiring 50 people in one location,” Lindblom said. “We can hire nationwide. So, I think that it will give us more opportunities to hire. I think that the companies that are going to succeed have figured out how to bring on and train people virtually, because I think that we’re going to continue to need people in the mortgage industry.”
Kurt Johnson says he believes that the foreclosure moratoriums in place today are likely to be extended into 2021, and customers will still have the ability to sign up for up to 12 months of forbearance.
“The availability of distressed properties like foreclosure sales by people who need to sell because they can no longer afford the home, is still going to be limited even into 2021,” Johnson said. “As a result, we think that there’s going to be continued pressure on supply. At some point in time, if COVID-19 does linger and work-from-home continues, people are going to tap into their home equity to make home improvements to things such as outdoor areas and home offices.”
In recent years, more companies in the mortgage and housing industry have developed programs focused on community engagement and helping more people from underserved communities access the tools and education they need to become homeowners. This will likely continue in the year ahead, bringing more opportunities to communities that have often struggled to build generational wealth.
As the Neighborhood Lending executive at Bank of America, AJ Barkley focuses on how to provide resources to help more people from underserved communities build that generational wealth through homeownership.
“We’re proud of the work we’re doing through our community homeownership commitment, which is closing cost assistance and down payment assistance, and it’s gone over extremely well,” Barkley said. “We believe that it is directly addressing the concerns of the community. We work with housing counseling agencies; we work with agencies that are helping people to re-establish their credit, all focused on helping people realize the wonder of homeownership.”
There is no doubt that technology will continue to become more advanced, and companies will develop more new ways to serve consumer needs. However, the focus on helping more people achieve the American Dream is one aspect of the industry that isn’t changing in 2021.