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
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
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.
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
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/.