by Robert Hyder
Over the next several months, a heavy volume of mortgage originations is expected. The reason is because of President Obama’s Homeowner Affordability and Stability Plan. This plan has prompted Fannie Mae to release their newest version of Desktop Underwriter, named DU Refi Plus. DU Refi Plus will loosen financing standards, still enabling homeowners who have lost equity in their homes to refinance and save tens of thousands of dollars over the life of their mortgage loan. DU Refi Plus alone is a fantastic start to reenergize the housing market, but coupled with historically low interest rates, many experts believe mortgage originations may double to an astonishing $3.1 trillion.
As a result of the low interest rates and the release of DU Refi Plus, there is legitimate concern that mortgage lenders will not be able to accommodate the capacity of originations that are expected to flood their operations centers in the coming months. After cutting their workforces, lenders will certainly be hard pressed to keep up with the demand. To soften the impact, lenders may deliberately increase their mortgage interest rates to slow business.
The anticipated increase in mortgage interest rates may only be a short-term solution. To counter the demand, mortgage lenders have been ramping up by hiring more staff. President Obama recently met with U.S banking executives in Washington to discuss the financial crisis. After the meeting, Bank of America CEO Ken Lewis told reporters that his bank has hired as many as 5,000 new employees “just to handle the capacity.”
In addition, DU Refi Plus will assist in streamlining the underwriting process by forgoing appraisal requirements because Fannie Mae already holds the credit risk. This will enable mortgage lenders to handle more loans because their underwriters will not be forced to meticulously evaluate a good portion of the underwriting process. Private mortgage insurance (PMI) requirements will also be waived on loans that would normally require it, as long as the existing mortgages do not.
Obama’s efforts to stem foreclosures and enable mortgage lenders to make more loans are encouraging on the housing front.
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Jamie Holts
March 30, 2009 @ 12:00 pm
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Jamie Holts
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Jamie Holts
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Jamie Holts
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Jamie Holts
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Jamie Holts
March 30, 2009 @ 12:57 pm
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ken hyder
March 5, 2010 @ 4:27 am
Over the next several months, a heavy volume of mortgage originations is expected