What should real estate investors expect from the mortgage lending industry this year?
This could be a year of massive changes in the mortgage lending industry. What can investors expect? How might it impact them, their plans, and the best strategies for making money in real estate?
Interest Rates
If there is one thing investors can count on this year, it is probably higher interest rates. Most of those in the game now have never experienced normal interest rates, or high interest rates. Investors have to build this into their models and plans. It will affect the cost of everything. On the bright side it could encourage more transaction activity, and lending.
Dodd-Frank
Trump has made a lot of noise about repealing the Dodd-Frank Act, and making it easier for mortgage borrowers to access credit. This may not be a fast or easy thing to change. However, doing away with these regulations which have really made things difficult for agents, investors, borrowers, and private lenders could make a big difference in the market.
Credit Scores
It is believed that millions of Americans are now experiencing rebounding credit scores as the damage of the crises fades out. This could flood the housing market with more qualified borrowers, just as the number of cash buyers is dwindling. However, it is also important to watch the effect of higher rates on the ability to maintain debt, and new credit scoring models which are being developed.
New Loan Programs
Expect to see a variety of new loan programs come into the market. Few anticipate a return to the good old subprime lending days, but lenders could develop new programs which push the limits, in expectation of a strong market, and relaxing of regulations under the new White House administration.
Demand to Borrow
With consumer and business confidence strong expect demand for mortgage loans to increase sharply. This could be vital for mortgage lenders and brokers who are facing a dramatic drying up of refinance activity.
Easing, but Not Easy
Just because lenders want to make more loans, doesn’t mean that we’ll see 100% no-doc or NINJA or NINA loans making a comeback just yet. Lenders have been used to demanding a lot over recent years. It may be hard for them to change. They like making the rules and staying in control.
Competition for Capital
While there is still a lot of capital out there, expect there to be more diverse demands for it. Recently it has been drawn to financing investment property loans in the US. This year, expect foreign markets like Italy which may bottom out to attract big funds, for more crowdfunding portals to be battling for back channels to sell loans, and for there to be an increased split in between the desire to fund residential buyers and investors.
Transaction Funding
Transaction funding will still remain the most reliable, efficient, and easy to access types of investment property financing for wholesalers and flippers this year.
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