Mortgage originations could sink more than expected

Abstract

The year-to-date drop-off in mortgage originations exceeded Fitch Ratings expectations, indicating a larger decline is likely than either the Mortgage Bankers Association or Fannie Mae predicted. "The challenging operating environment is pressuring all issuers, although issuer-specific effects will depend on the mix between origination and servicing as well as channel and strategy, with weaker players that lack scale or have outsized exposure to the wholesale channel facing potential consolidation," a Fitch report said. United Wholesale Mortgage CEO Mat Ishbia vehemently rejected an investor's demand for aggressive cost cutting. Supply shortages continue to fuel home-price appreciation even with rising mortgage rates. The current U.S. housing supply deficit is between 3.6 million units and 5.5 million units, Fitch estimated. These are expected to remain under pressure relative to their historical averages, Fitch said. "Despite the profitability pressures, leverage has come down with the reduction in the origination pipeline and improved mortgage servicing rights valuations given declines in prepayment speed estimates to single-digit levels resulting from rising mortgage rates," Fitch said.