As house prices and over-levered homeowners mark time ahead a “correction” of unknowable depth and breadth, which will bring the Fed and .gov back into the game at levels that make 2009-2015 look like an “under-reach”, the mortgage sector has undergone continual and dramatic GSE, FHA, and private label credit guideline easing, and technological innovation in loan origination, compliance, and efficiency, as part of the “digital mortgage revolution”.
This has prepared the space for a durable volume surge of refi’s and new mortgage credit structures that we don’t even know about yet (e.g., new-vintage, mainstream ‘no-LTV and/or DTI’ streamline refi’s and purchases, mortgage & mod hybrids, etc.), which will break historical volume records. This is provided the lagging, front-end, ‘consumer outreach’ tech component catches up to the back-end, which is something I have spent a tremendous amount of time on over the past couple of years.
Red flags will fly by those fearing returning to the failed lending policies of the past. But, pundits will proclaim that they learned their lessons — from before the crash through interest only loans and pay option ARMs, and post-crash vis-a’-vis exotic mods — that when given a low-enough “monthly payment” rate, being 75% underwater, having 70%+ debt-to-income ratios, or both, doesn’t necessarily mean an automatic default. And the “more lending” side will always win out…because it has to.
The “great refi-boom of 2003-06 and mortgage mod/redo bubble of 2009 to 2013 rolled into one”, is the best way I can describe what could be on deck for originators.
Bottom line: The last 5 years was about housing with mortgage taking a back-seat, of sorts. Likely beginning sometime in 2018, the following 5-years will be about mortgage and related credit spreading wider and deeper than anything we can imagine now (perhaps make the mortgage credit Bubble 1.0 volume look sane by comparison).