Mortgage financiers are gearing up for a different lending landscape in 2007. To succeed in the coming year, lenders will need to pay attention, look around and get in front of trends. Here are a few trends we can already foresee:
The Return of Functional Borrowing
We anticipate that loans taken in 2007 will be more functional—like home equity loans for education, debt consolidation and home improvement. The tax deductibility factor in home equity lending will keep it an attractive source, unlike the past few years when consumers were heating up the market by refinancing first mortgages with short-term equity lines of credit. Next year, we predict a more traditional market place with re-fi’s [refinancings] being for traditional mortgage products rather than as home equity liens or loans. The primary reason for this shift is the change in the interest rate environment. Recently the first mortgage re-fi rate has gone to 6 percent. Prime is 8.5.
Security Will Be King
We expect all lenders to be more concerned with security than ever. These fears have been fueled by continuing stories about compromised customer data. We forecast that lenders will want higher levels of security—probably encryption for all data. In fact, in anticipation of this demand, we will be encrypting all of the data we exchange with the lenders we serve, whether or not they request it
Continued Streamlining of the Mortgage Process