In 2021, financial institutions can expect to see new and continuing trends due to the impact of the pandemic and the election on the housing market and mortgage industry. From a shift to teleworking to a change in affordable housing to increased needs for deferments and forbearances, institutions are going to see a wide variety of trends emerge that will continue to be influenced by the pandemic’s impact for years to come.
Working From Home vs. Working in the Office
Are the days of going into the office long gone? Considering the major factors of 2020, including the pandemic and shelter in place orders forcing people to continue to teleworking, it is likely that some employees will not want to return to the office after the pandemic subsides.
This isn’t a one-sided battle either, financial institutions have saved in operational costs by having their branches shut down and their employees remote officing – (or operating with a significantly reduced number of in-branch staff during shelter-in-place orders). These same institutions have also heavily invested in technology that helps make remote working possible, and it’s likely these resulting cost-savings and return on investments will have some executives opting to have employees continue to stay put.
Long Term Impact on the Housing Market due to the Pandemic
Will the pandemic result in a boost for affordable housing? With employees currently (and potentially continuing) to telework, there is less of a need to live geographically closer to the office. With the power to work from anywhere with a reliable internet connection, the industry may experience a shift in the housing market where buyers are able to expand their home searches into new areas.
For example, if a loan officer can work from home, then home doesn’t have to just be in the suburbs of the city where the lender is headquartered. With remote working, an employee could realistically move from an overpriced in-town apartment to buy an affordable home in another town or city, or a home in the mountains or on the coast.
In addition, institutions can also expect rates to remain low for the foreseeable future. In fact, HousingWire explained that, “interest rates for the 30-year fixed-rate mortgage will end this year at about 3 percent and could hit around 3.3 percent in 2021,” meaning if rates rise, it won’t be by much.
Biden’s Plan for Mortgage Tax Cuts and Its Impact on the Industry
While there are still details to come, with a proposed tax plan that would give first-time homebuyers a “down payment” tax credit of up to $15,000, Biden’s plan would have major impacts on the housing market. For many people, especially Millennials/Gen Zers and minorities, this could provide the incentive needed to make the move toward buying their first home.
Increase in Need for Commissions
In mortgage accounting, the industry will likely need to direct more resources toward commissions management – financial institutions will need to lean on commissions software to reduce manual labor required by the accounting department, allowing users to quickly and easily calculate commissions, commission adjustments, bonuses and more.
Commissions calculations are becoming increasingly complex and financial institutions require the ability to quickly calculate the commissions on not only the current period, but to recalculate commissions on prior periods as well – particularly when required by an audit.
With experienced mortgage personnel in short supply, commissions calculation software that is flexible, cost-effective and can pay numerous people a commission, bonus or override relative to a single loan, the software can help firms retain and recruit the talent necessary to take advantage of 2021’s strong home lending market.
Forbearances and Deferment
While the pandemic has triggered an increased need for the processing and managing of forbearances and deferments, as people go back to work there will be less of a need for this. However, there will likely still be a large focus on this type of activity due to the increase in volume. While this is temporary, financial institutions will need to find solutions to process and manage these requests, especially as we continue to deal with the long-term effects of the pandemic.
Between a pandemic and a table turning election, financial institutions are seeing unprecedented changes in banking and the economy as a whole. Just as it was in 2020, adaptability will be the key to success for banks and credit unions. From the projected increase in first-time homebuyers to the need for effective management of forbearances and deferments, positioning for survival in the “new normal” will be crucial to any financial institution’s ultimate well-being.
Brian Lynch is the President for Irvine, Calif-based Advantage Systems, a provider of accounting and financial management tools for the mortgage industry. More information on the company can be found at http://www.mortgageaccounting.com/.