Genworth Mortgage Insurance, a unit of Genworth Financial, Inc. (NYSE: GNW), on Wednesday reported that a survey of industry executives conducted at the 2016 Mortgage Bankers Association (“MBA”) Annual Convention and Expo in Boston, MA. found that 50% of industry executives believe underwriting standards are overly restrictive, down from 61% at the 2014 MBA Annual Convention and Expo in Las Vegas.
“This year’s survey data is consistent with the industry’s emphasis on improving credit access for more home-ready home buyers,” said Rohit Gupta, president and CEO of Genworth Mortgage Insurance. “While there is certainly more to be done on this front, we are pleased by the gradual progress we have seen over the past two years.”
50% of respondents believe overly tight underwriting standards are hurting home-ownership opportunities for U.S. home buyers, while 12% feel that tighter underwriting restrictions are still needed. The remaining 38% believe the current standards are appropriate.
When presented with the same question in Genworth Mortgage Insurance’s survey during the MBA’s Annual Convention and Expo in 2014, 61% believed overly strict underwriting was harming the dream of home ownership, while 25% supported tighter underwriting restrictions and 14% viewed the standards at the time as appropriate. Genworth said the 24% point increase in executives who believe the current standards are appropriate reflects a higher comfort level with today’s credit environment.
Despite improving credit access, many potential home buyers are still being priced out of the purchase market and the industry is divided on the root cause. 37% cited high down-payment requirements as the biggest driver; 33% cited stringent credit requirements; and 30% believe a shortage of single family homes for sale was the greatest obstacle.
71% view the impact of borrower requirements placed by the GSEs, or government-sponsored enterprises, on 97% LTV loans either negatively because they restrict mortgage credit (which in turn shrinks the purchase market) or neutrally because they haven’t had a major impact on originations. The remaining 29% view the impact as positive because they help mitigate risk for originations. These results suggest that respondents still think that more can be done to prudently expand the credit box.
45% of respondents identified increased compliance burdens as the biggest threat to the housing industry over the next 12 months. An additional 32% cited borrower access to credit as the biggest threat, 20% believe the biggest threat is the current rising rate environment, and 3% cited lack of progress on GSE reform as the most severe industry threat.
Notably, Genworth asked this same question at the 2015 MBA Annual Convention and Expo in San Diego, with almost identical results (about 1% variation on all four responses). This shows that, one year after the October 2015 implementation of the TILA-RESPA Integrated Disclosure (TRID) regulation and approximately one year ahead of the new Home Mortgage Disclosure Act (HMDA) amendments to Regulation C set to take effect in January 2018, we are still in a period of regulatory evolution that is top of mind for our industry.
91% of respondents believe increased automation in the mortgage origination process will have a positive impact that facilitates and accelerates originations while improving accuracy on application forms. An additional 8% have not seen a major resulting change in either direction, and 1% viewed automation as a negative that will hurt originations and overlook red flags in borrower profiles. As industry demand increases for faster turn times and more streamlined originations, so too will the demand for firms with top technological infrastructure.
“As an industry,” Gupta continued, “we have implemented significant improvements in our technological infrastructure and we are poised to see positive steps on housing policy. It is important that our industry maintain a strong ongoing dialogue that maximizes these improvements and supports the strengthening purchase market.”
The survey of 226 mortgage professionals was administered in person at the Mortgage Bankers Annual Convention and Expo in Boston, MA, from October 24-25, 2016.
