Mortgage Grader

Forecast: Rising rates will curb 2017 mortgage volume

By JEFF LAZERSON / CONTRIBUTING COLUMNIST

After the post-election rocketing up of interest rates, it’s time to dig in (perspiring profusely) and make my 2017 mortgage and real estate predictions.

1) According to Freddie Mac, the 30-year fixed averaged about 3.63 percent in 2016. You’ll see 4.375 percent for 2017. Inflationary pressures will be offset by more Brexit exits fleeing to the safety of the U.S. Treasurys.

2) Nationally, loan volume will drop to $1.2 trillion from what is expected to be $1.8 trillion in fundings for 2016. Fewer refinancers and more affordability challenges, especially for first-timers.

3) President-elect Donald Trump is going to help low-to-moderate income homebuyers by attracting employers to low-wealth communities in the form of enterprise zones. That is, he will legislatively create tax credits and lower federal tax rates as incentives for companies to move or add operations in these communities, thereby creating better paying jobs.

4) O.C. home sales volume will decrease by 12 percent in 2017 compared to a 2.3 percent 2016 increase.

5) Orange County’s median home price will be flat in 2017 compared to 2016’s 6.1 percent increase.

6) Reverse mortgages will see a sharp 10 to 15 percent loan volume increase in 2017. According to the FHA, nearly 49,000 seniors took out loans with this affordable (no) payment nugget.

These loans are much more profitable for lenders. Couple that with pitchman Tom Selleck or what the industry refers to as the Selleck effect, higher home prices or more equity to pull, and low levels of savings amongst the 62 and over crowd make the stars align.

7) California will protect consumers by legislatively banning mortgage companies and mortgage loan originators from participating in payola schemes that provide access to mortgage shoppers captive to builders, realty firms and realty agents.

In a similar fashion to SB 133 signed into law by Gov. Arnold Schwarzenegger in 2008, every type of payola from title insurers to real estate professionals was banned. And, it is still working today.

Since the big banks pulled away from marketing servicing agreements just over one year ago, more mid-tier and smaller lenders were engaged by real estate sellers in return for mortgage borrower access. Shamelessly aggressive tactics are being used every day by some real estate sellers to enrich themselves at the borrowers’ expense of higher rates and fees.

8) Fannie and Freddie will not be privatized. It’s too expensive and too politically dangerous for Congress because mortgage financing would collapse.

9) Mortgage interest deduction is not going away, nor is it getting reduced.

10) Fed Chair Janet Yellen will raise short-term rates twice in 2017.

If you have questions or comments, please contact Jeff Lazerson by clicking here.