uct, there is an excellent oppor- tunity to gain market share in an industry where many players will be at risk of exiting. The affordability challenge that we mentioned earlier cre- ates the second industry-specific risk — and opportunity. In or- der to improve access and gain share, more lenders are offering non-Qualified Mortgages. Inside Mortgage Finance reports that non-QM loans increased 24% from the previous year through the first three quarters of 2018. This makes it a growing product in a shrinking market, even though non-QM loans still make up less than 3% of orig- inations. Lenders with the ca- pability to offer non-QM

passage are slim given the divided Congress, and any changes would occur over several years. However, it is a risk factor that lenders need to be wary of. For lenders who find themselves on the margin because of macroeconomic factors, technol- ogy factors or product factors, the prospect of major investments on the horizon to comply with what- ever changes GSE reform bring could be the straw that breaks the camel's back. Thus, uncertainty in 2019 is par- ticularly high for mortgage lenders. Measures of macroeconomic policy uncertainty are extremely high, with some even higher than they were during the financial crisis. This makes it more difficult for central banks to cal-

a digital process that delights customers. Some effects of the broader digitization of financial services have revealed themselves early in the year. The announced merger between BB&T and Sun- Trust Banks has as one of the pri- mary motivators, cited by the CEOs of both banks, the need to invest aggressively in technology in order to compete. Mortgage lenders, particularly those with a monoline business, will face a particular challenge of having to make significant Invest- ments at a time when profitability and revenues are in decline or stagnant. Those that do not have the capacity to invest in technol- ogy will either have to merge to increase scale, or they may find themselves unable to continue in the business. Customers are increasingly revealing their pref- erence for the digital product. At LendingTree, our new mortgage experience that eschews phone calls is selected by borrowers at a rate of 4 to 1. For lenders that can successfully create a digital prod- Growth in 2018 was largely driven by one-time factors, including the tax cuts and the less- talked-about fiscal stimulus. The effects of these policies are diminishing, and slow growth is baked into the cake.

loans will be able to mitigate some loss

ibrate monetary poli- cy and could curtail overall business investment and expansion plans and have a negative effect on consumer sentiment. LendingTree will continue to evolve to provide

of revenue and volume in their standard prod- ucts. While

consumer demand is expected to

decline across all mortgages, Fannie Mae's

Mortgage Lender Sentiment Survey expects demand for non-GSE eligible mortgages to weaken the least, and the MBS market is getting prepared for more Non-QM issuance. Beyond borrowers with less than stellar credit, these loans target self-em- ployed, high-net-worth and inves- tor borrowers. Third, GSE reform may finally get its time in the sun in 2019. The change in leadership at the FHA increases the odds of reform. Industry players such as the Mort- gage Bankers Association and the National Association of Realtors are putting forward their propos- als on how the GSE should be reformed. We believe the odds of

the best experience for both consumers and lenders. Whether that’s adopt- ing digital experiences to align with shifting consumer behavior or re- fining our matchmaking algorithm to connect borrowers with the right loan and lender as guidelines change, LendingTree will continue to be an industry leader.

Tendayi Kapfidze is Chief Economist at LendingTree, leading the company’s analysis of the

U.S. economy with a focus on housing and mortgage market trends. Learn more about LendingTree at

18 think realty housing news report

april 2019 19

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