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Opinion: the beginning of the mortgage ice age

The companies with the right people and technology in place will continue to thrive once the ice thaws.

Planet Earth has has gone from a ball of molten rock to ice, and then, to the climate we have today. Just like Earth, mortgage rates and housing markets are cyclic and we’re heading into another Ice Age.

Find me a sales meeting in the U.S. that didn’t talk about the cycle. There is a broker in charge talking about the spring buying season and an elder mortgage sales manager talking about some interest-only (IO) loan or ARM from 1990 that was 8%. Any given year or decade, we see the same trends.

If I believe Twitter and the charts and graphs that show 2015 trends or 2020 trends or 1982 trends, I can’t help but to ask, what if these are not an indicator of today, but the beginning of a new normal? If not, what does that mean? What if this isn’t our typical cycle?

It’s time to change our mindset

We are looking at this 2022 market like a snow day in January. Close it down for a day or two, clean it up and get back to business next week when it warms up. I think we’re in a cycle, and it’s the equivalent of all the past cycles — rolled into one. An Ice Age, not a snow day.

Rates will not come down this year. There is no spring buying season. The ARM and IO products are the same prices as the Conventional loans. FHA, VA and USDA aren’t accepted by sellers. Investors and trust funds keep buying the bottom of the market from under the first-time home buyer. Builders do not have inventory — or workers and supplies.

The Ice Age from the Younger Dryas era took humanity down to about 8,000 people. Today, we have about eight billion roaming the globe. Things recover from the bottom of any cycle. In the end of this, we will see some changes in business, marketing, compensation and structure. We must figure out who stays and who goes extinct. Yes, things went extinct in the Ice Age. Things that were too big, like Mammoths, too slow, like the Giant Sloth, things that fed on both, like the saber-toothed tiger.

What are you doing to adapt?

Did you store acorns when we had them so you could sustain yourself and your employees? Or are you slow to adapt? Are you too big and need massive volume to stay alive? Is your business source something or someone who is both? If so, you need to change or you may be extinct.

I wrote before about symbiotic relationships, now, it’s time to build on them. Lean into the wind together. Market our customers together to reduce waste and compensation that makes it harder on the home buyer. Tighten our belts together. That doesn’t mean starve. It also doesn’t mean everyone makes it through. There will be those who fall and do not survive.

We can all look around our office and see those people right now — hanging on by that one deal. We know the competitors that gouge customers for big commissions or are so big they own the market with bad rates, products or service. Companies with multi-layer management must streamline.

The new normal

There will be fewer of us, but the ones that remain will be the best of us. This is our opportunity to embrace technology, new partnerships and artificial intelligence. That will help best processors, underwriters and closers handle bigger pipelines with less work.

Mortgages can be streamlined in many ways to reduce cost and waste. Title companies that use the best technology to speed up the closing, cut fees and closing travel and reduce title delays are essential. Real estate agents who are full time, efficient and enhance the buying experience at less cost to buyers and sellers are necessary.

The first quarter of 2022 has already shown us substantial drops in volume. Do not be the last one to notice your Q1 numbers were just overflow Q4 pipelines. The Fed has no plans on helping us. Builders are doing their best but need years to catch up. Products are limited as is inventory.

We are heading into the Ice Age. The companies that get the right people and technology in place will be there when things thaw. Ask yourself, am I prepared to weather an Ice Age or am I planning for a quick snowstorm?

BJ Witkopf is a mortgage specialist with Assurance Financial.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:
BJ Witkopf at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]

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