NBC News: Bank Processing Swamped by Rising Mortgage Demands

Demand for home mortgages and refinances is surging, but banks are responding too slowly and aren’t hiring enough staff, according to NBC News, and this could undermine the Federal Reserve’s $40 billion stimulus plan. 

NBC News reports

The dysfunction in the mortgage market, which has yet to fully recover after its battering in the U.S. housing bust and subsequent financial crisis, means most benefits from the Fed’s new stimulus plan may be accruing to banks instead of consumers.

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Capacity constraints work in the banks’ favor. Profit margins for home lending are more than double their usual level, JPMorgan Chief Executive Jamie Dimon told investors last Friday. The major U.S. banks, including JPMorgan Chase & Co, Wells Fargo & Co and Citigroup Inc, all said mortgage operations boosted third-quarter profits.

Lenders making mortgages say they do not want to hire too many staffers only to lay them off when volume declines. 

“We are trying to…not over hire,” Andy Cecere, chief financial officer at U.S. Bancorp, said in an interview on Wednesday.

Mortgage applications are also jumping, rising nearly 17% in the week ended Sept. 28. With demand that strong and no staffers to handle extra business, banks have little reason to cut rates much.

Mortgage demand was rising even before the Fed announced its latest plan to buy home loans, but that announcement immediately lowered bank funding costs. The effect on bank revenues will take longer to show up, because it takes months to process and close mortgage applications.

For consumers, capacity constraints among mortgage lenders mean rates are not falling as much as they theoretically could.

Read the full NBC News article

Written by Jason Oliva

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  • Too bad none of that increased mortgage activity has come our way.  The just released Outlook report for September was not particularly encouraging.  

    Case number assignments were down for the month of September,  total Saver endorsements for the fiscal year were down by 8 endorsements year over year and HECMs for Purchase for the year were up by just 97 endorsements from last fiscal year.   

    By now we are all familiar with the fact that total endorsements are down by over 25% for the fiscal year.  This article points up that our part of the industry does not have the same volume trends as the forward side.

  • Wow, this article is just a little behind the times. I work with multiple investros and most have caught up their pipelines, and turn times are back to normal. Volume has decreased and I see no reason for investors to ‘staff up’ for what may be an anomoly.

  • Part of the lack of capacity is a direct consequence of Dodd Frank, uncertaintly about forthcoming regulation, and the overall tone of disdain for business people by the current administration.  These things have resulted in hesitation on the part of existing lenders and those considering risking capital to enter the business.   

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