Past performance is the best predictor of future performance. It’s a business mantra that, like a lot of things last year, got turned on its side by the global pandemic. Yet the changes that ensued created exciting opportunities for the buyers, sellers and existing homeowners fortunate enough to leverage them.
After processing a record-high volume of loans and refinances in 2020, lenders are optimistic that the 2021 market will remain strong. They expect that historically low interest rates lingering through the second quarter will continue to motivate complacent buyers, sellers and homeowners to consider their options.
The low cost of borrowing money in 2020 suddenly made vacation homes, remodels, additions and move-up properties within reach for buyers who didn’t have those choices before the pandemic disrupted our lives. Still, lenders don’t expect the volume of loans in 2021 to reach 2020 levels, because much of the demand has already been met. They do, however, anticipate high volume.
To help you best serve clients in these uncertain times, we consulted with three of the city’s top lenders to find out their expectations for 2021 and what changes caused by the pandemic are here to stay.
A flurry of activity
“The pandemic was a huge game changer,” said Tracy Flanagan, vice president for residential lending at Blueleaf Lending/Midwest Community Bank. “It was devastating, but it did bring about the lowest rates in history.” Then, the question for lenders became, “How does it impact the three types of buyers?”
Flanagan recalled first-time buyers were anxious to find out if low down payment programs were still allowable. The answer was yes, and first-time buyers who still had jobs were not held back from the market. On the other hand, repeat buyers who accepted banks’ well-intentioned offers of forbearance (pausing payment on mortgages) were now wondering if it would ruin their chances of refinancing.
“Pausing your mortgage payment doesn’t make your credit score go down, but it does show lenders you’re not making your payment,” Flanagan explained. If you choose to refinance, they’ll want to know why. In some instances, consumers took forbearance as a safety net: They could afford their mortgage at the time, but they were uncertain about the future. In case they lost their jobs, they wanted to free up money for other purchases. “It took some people out of the market for the time being and didn’t affect others,” Flanagan said.
As it stands now, payments that were paused are being tacked on to the overall principal, adding to the life of the mortgage, said Drew Boland, senior vice president of mortgage lending for Proper Rate. However, the challenges didn’t stop there.
Purchasing or refinancing a loan became more complicated for self-employed, commissioned and…