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Opinion, commentary and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.

How long will this mortgage drought last?

When will lenders and servicers make money again?

January 17, 2014
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There are not many mortgages being written right now.

New rules from the Consumer Financial Protection Bureau, such as the Ability-to-Repay, Qualified Mortgage and additional servicing rules, are coming into force.

"Since the rules are so complicated and require a high degree of technological capabilities to ensure compliance," states Kathleen Tillwitz, managing director of Operational Risk at DBRS, "not all industry participants are confident that they have appropriately adopted the changes into their operations or fully understand how to quantify the liability for noncompliance."

For the short term, it's made a bad situation worse. Yes, mortgage applications are up. But that is for the week leading into the rule-enactment.

Purchase originations are expected to reach a revised $677 billion for 2014, according to the Mortgage Bankers Association. That's down from last year, which was already a pretty slow year.

What's more, the refinance mortgage market is expected to be down by more than 60% this year.

Luckily DBRS provided a mortgage review and outlook this afternoon. But it doesn't look good.

The first half will see historically low mortgage volumes, the report states, and this behavior will only slightly improve for the second half.

It doesn't look any better for servicers either. "2014 will be a year of fines and lawsuits for servicers as they work to perfect the art of following the new servicing rules," Tillwitz added. Therefore, the cost of servicing will be even greater under the new CFPB rules.

So, the mortgage drought will continue into 2014. Let's hope the DBRS 2015 outlook will have better news.