Worst Is Over for Collapse in Lending
Kathleen M. Howley | January 15, 2015
Mortgage lending plunged 36 percent last year, marking the industry's worst showing in about 17 years. But "the worst is over," says Mark Zandi at Moody's Analytics. "Mortgage bankers will feel a lot better by the end of the year than they do right now. It will be a long, slow climb out — but better days are ahead."
Read more: Loan Demand Posts Biggest Leap in 6 Years
Last year, Wells Fargo & Co., the nation's largest mortgage lender, saw its originations plummet 50 percent from a year earlier and its mortgage volume drop to $175 billion, the lowest level since 2000. JPMorgan Chase & Co., the No. 2 lender, reported a 53 percent drop in originations and volume dropping to $78 billion.
Wells Fargo CEO John Stumpf said on a conference call this week that the bank's 2015 originations are expected to rise to $1.2 trillion, mostly driven by new government policies that will likely expand the pool of borrowers who can qualify for loans.
"It got too restrictive, and customers who deserved a loan, who wanted to buy a home and could afford it, could not get credit," Stumpf said. "I don't want to overstate the amount of those folks, but there was that element, and I think we've come to a much better place with regulators, with the industry, and with customers."
A stronger job market coupled with wage growth is also expected to help more borrowers qualify for financing. The Mortgage Bankers Association predicts that mortgages for refinancing and home purchases likely will rise 6 percent this year over last year.
"We're going to see a resurrection in wage growth," Zandi says. "That's going to give potential home buyers a lot of financial firepower and give them the boost of confidence they need to make a big-ticket purchase like a home."
Source: Bloomberg News