Lending industry leaders surveyed by Fannie Mae see the lack of housing supply as the biggest risk factor in 2024, but most expect refinancing to pick up next year if rates continue to fall.
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Nearly two out three mortgage lenders trimmed their workforces in 2023, but most lenders expect to either maintain or grow their payrolls this year, according to a survey of more than 200 senior executives by mortgage giant Fannie Mae.
While the survey found two-thirds of mortgage industry executives think it’s likely the U.S. economy will tilt into a recession within the next two years, that’s down from 93 percent a year ago.
Lending industry leaders see the lack of housing supply as the biggest risk factor in 2024, but most (64 percent) expect a new mortgage refinance boom to kick off this year or next if rates continue to fall.
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Doug Duncan
“After job cuts in 2023, and with lenders generally less pessimistic about the economy and the direction of the mortgage market, staff sizes appear to be normalizing” at the lowest level since 2014, Fannie Mae Chief Economist Doug Duncan wrote in summarizing the survey’s findings.
“Mortgage activity likely hit a post-pandemic floor following that era’s historically high mortgage purchase and refinance volumes,” Duncan wrote. “As a result, we believe some mortgage lenders are now preparing their workforces to meet potential growth in mortgage originations should the slow recovery of the housing market continue through the rest of this year and into 2025.”
Conducted in early May and released this month, Fannie Mae’s Mortgage Lender Sentiment Survey gathered perspectives from 215 senior executives at 198 lenders, including mortgage banks, depository institutions and credit unions.
Mortgage lenders’ top business priorities
Source: Fannie Mae Mortgage Lender Sentiment Survey, July 2024.
“Talent management and leadership” was the top priority for most executives, followed by cost-cutting and business process streamlining.
“Retention is top of mind,” an executive at one large institution told Fannie Mae. “We want to retain our LO (loan originations) team that is performing as well as continue to scout for new talent to join our organization. We are in growth mode for the foreseeable future.”
Fannie Mae defines large institutions as having more than $245 million in 2023 loan origination volume.
While 62 percent of mortgage executives said they cut their workforce last year, 54 percent said they expect 2024 staffing to stay about where it was last year, while 28 percent expect to staff up this year.
Last year, as mortgage rates were climbing past 7 percent to levels not seen in more than two decades, cost-cutting and business process streamlining were mortgage executives’ top two priorities.
An executive at a mid-sized institution with between $46 million and $245 million in originations said business process streamlining remains a top priority, with the lender migrating to a cloud-based system “to minimize new product introductions and streamline the process for employees and members seeking a loan.”
New products and services were a top priority for one in four executives surveyed, with a leader at a smaller institution (less than $46 million in originations) saying that “Traditional loan origination has decreased so much the last 18 months, we are looking at other types of ways to make money, be it new products or different services.”
Investments in consumer-facing technology — the top priority for lenders in 2019 — failed to crack the top three priorities for the third year in a row.
Lenders less certain of a recession in next 2 years
Source: Fannie Mae Mortgage Lender Sentiment Survey, July 2024.
Mortgage execs think the odds of a recession in the next two years are better than even, but only 19 percent think a recession is “very likely,” down from 57 percent a year ago. Close to half of lending industry leaders (48 percent) still believe a recession is “somewhat likely.”
Scarce housing supply was the risk factor cited most often (64 percent) by mortgage executives, followed by mortgage rate changes (59 percent), household debt level (35 percent) and home prices (31 percent).
Fannie Mae economists, who last year were warning that Fed tightening would likely lead to a recession, backed away from that call in January.
In their June forecast, Fannie Mae’s highly regarded Economic and Strategic Research (ESR) Group forecast that purchase mortgage originations will grow by 14 percent next year, to $1.5 trillion, as 30-year fixed-rate loans will drop to 6.3 percent by the end of next year.
Fannie Mae economists are predicting even more dramatic growth in refinancing next year, with refi volume growing by 46 percent to $544 billion.
Two-thirds of mortgage executives surveyed by Fannie Mae are expecting a refi boom. While only 6 percent see that happening this year, 26 percent expect refinancing to pick up in the first half of next year, while 32 percent are planning on a refi boom kicking off in H2 2025.
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