Independent Banker - April 2023 - 30

PORTFOLIO
FOCUS LENDING
Mortgage lenders adapt
to higher-rate cycle
Mortgage interest rates continue to rise, but community bankers are
keeping it all in perspective, applying creativity and strategy to their
lending portfolios. By Beth Mattson-Teig
ortgage lenders are battling
a more challenging mortgage
market, with a slowdown in
originations that is well underway.
The jump in interest rates over the
past year has priced many wouldbe
homebuyers out of the market.
Compounding the problem further is
a shortage of for-sale homes in many
M
markets across the country.
However, although community
banks are feeling the impact from
less activity among both new home
purchases and refinancing, the lull is
not entirely unexpected after record
activity and a nearly 10-year run of
historically low rates.
" I think it's going to feel worse
than what it is, just because 2020 and
2021 were so elevated that it became
the new norm, " says Harry Hayes, vice
president and director of mortgage
origination at $882 million-asset Clear
Mountain Bank in Morgantown, W.V.
During the refinance boom of 2020,
Clear Mountain Bank originated a
record level of residential loans-nearly
$275 million. Although its annual
mortgage volume dropped sharply to
$220 million and $128 million in 2021
and 2022 respectively, the past two
years still represent the second- and
third-highest origination volumes in the
bank's 125-year history.
According to the December 2022
Fannie Mae Housing Forecast, singlefamily
mortgage originations are
expected to decline to $1.7 trillion in
2023, down sharply from the high of
$4.6 trillion in 2021 and a further slide
from $2.3 trillion in 2022-but these
were true outlier years.
" People have gotten used to these
incredible mortgage origination
numbers, but it also is important to
put that in perspective, " says Ron
Haynie, ICBA's senior vice president
of housing finance policy. The forecast
volume of $1.7 trillion in 2023 is still a
very big number, he adds, and there is
significant pent-up demand for housing
across the country.
Now, community banks are looking at
ways to bring new business in the door
and protect the profitability of loans on
their balance sheets.
Creative ways to generate business
Mortgage lenders are taking different
steps to generate business and offset
some of the sticker shock that exists
in the current high-rate market. One
tool making a comeback is temporary
buydowns to reduce the initial loan rate.
The 2-1 buydowns available allow a
borrower to pay a lump sum to reduce
the mortgage rate by 2% for year one
and then 1% for year two before it
30 // ICBA Independent Banker // April 2023
Artwork by Tanya Joy/Adobe

Independent Banker - April 2023

Table of Contents for the Digital Edition of Independent Banker - April 2023

Independent Banker - April 2023 - Cover1
Independent Banker - April 2023 - Cover2
Independent Banker - April 2023 - 1
Independent Banker - April 2023 - 2
Independent Banker - April 2023 - 3
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Independent Banker - April 2023 - 24A
Independent Banker - April 2023 - 24B
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