Southeast Michigan's mortgage industry giants remain steadfast in their belief that business will remain steady, despite economic pain from the COVID-19 pandemic.
The first couple weeks of lockdowns in late March and early April made for a bumpy ride, mortgage executives say. But as June progresses, they say some initial consumer reluctance is giving way to a largely healthy market.
Several factors are contributing to this, sources say. That includes historically low interest rates leading to consumers seeking refinancing of current mortgages and a delayed spring purchasing season.
"Well, the demand for mortgages is off the charts," said Mat Ishbia, president and CEO of mortgage loan originator United Shore Financial Services LLC based in Pontiac.
That demand, according to Ishbia, is almost entirely focused on 30-year fixed-rate mortgages with an interest rate in the range of 2 percent-3 percent.
"Thirty-year fixed in the twos is all we're doing right now," Ishbia said. "And so that's going on and so the demand is off the charts. There's $11 trillion of mortgages in America and almost everybody in America that didn't get a mortgage in the last three to six months should be refinancing. And so there's a huge demand for refinance."
In early April, Ishbia told all United Shore employees that no matter how bruised the mortgage sector got due to the pandemic, he was willing to promise no layoffs of any kind at his company.
Longer-term data on the overall state of the mortgage industry since COVID-19 and the resulting economic collapse remains somewhat hard to come by.
That's because most of what's presently available came out just as lockdowns were being implemented. But a weekly update released June 3 by Washington, D.C., trade group the Mortgage Bankers Association shows some signs of hope for the sector.
The overall Market Composite Index dropped 3.9 percent on a seasonally adjusted basis from the week before. To Ishbia's point, the MBA's refinance index dropped 9 percent from the previous week but was up 137 percent from the same time a year earlier.
Meanwhile, applications for mortgage purchases have been on the uptick, according to the MBA, with a growth of 5 percent in the final week of May and 18 percent higher than one year ago.
"The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring," Joel Kan, MBA's associate vice president of economic and industry forecasting, said in a statement. "However, there are still many households affected by the widespread job losses and current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months."
Kristy Fercho, executive vice president and president of the mortgage division at Flagstar Bank in Troy, concurred with the notion that the typical spring home purchasing season is mostly just being pushed into the summer months.
"So it's accelerating pretty quickly, which is making true this notion that the purchase market is still going to happen this year, it's just going to be delayed," Fercho said.
Fercho also pointed to another factor, unique to the coronavirus pandemic, that could be driving people to buy new homes.
As people have been cooped up in their homes and practicing social distancing, the appeal of buying a new house — perhaps with an extra room for a home office or a finished basement — has been gaining appeal.
"So I think that really given people time to think about what they actually need in their home and they're acting on that," Fercho said.
With an unemployment rate in the double digits, companies like United Shore and Detroit-based Quicken Loans Inc., two of the biggest players in the mortgage space (and not technically competitors because they each play in different spaces of the market) now find themselves on a hiring spree.
United Shore has about 5,800 employees,although most continue to work remotely. Ishbia said he anticipates ending the year with around 8,000 people. Last July, Crain's reported that the company had about 4,100 employees at the time.
Quicken Loans, meanwhile, with approximately 19,000, has hired about 2,000 people in the last three months and anticipates bringing on another 1,000 over the summer, according to Mike Malloy, Quicken Loans' top human resources executive. The company began 2019 with about 17,000 employees.
Both Malloy and Ishbia say their hiring ramp-ups are happening across every segment of their organizations, with particular focuses on company operations such as underwriting, mortgage sales and technology.
"In terms of our organization and our team members, things are really heading in a positive direction," Malloy said, noting that the company remains bullish on the mortgage market as they expect the economy to recover from the economic fallout from coronavirus.
"We are expecting growth," Malloy said. "We are seeing great tailwinds in the mortgage market at this moment."
The COVID-19 pandemic is sure to have a variety of lasting effects on the mortgage industry, some specific to the sector and some less so, sources say.
For starters, companies like Quicken and United Shore are wrestling with when and how to bring employees back to their respective offices.
Ishbia said United Shore is slowly reopening its two-building campus in Pontiac. Executives at the company have previously said they don't anticipate remote work to be a permanent option for workers post-pandemic.
Quicken Loans executives, on the other hand, say they expect more flexibility between working in an office and working remotely.
"Obviously, culture is critical to us and we believe that interacting with everybody else in the organization is key to that culture," Quicken Loans Vice Chairman Bill Emerson said on June 1, according to a report in National Mortgage News. "But we've been able to communicate and stay plugged in and stay connected (with remote workers)."
Ultimately, Emerson said the company will work to give employees the freedom they need to make choices that work for them.
"A lot of people absolutely want to get out of their homes, they want to get back into the office. So when we're able to do that, let's make them the first folks, they want to come in anyway," he said. "We're learning from other businesses what that means to come back into the office space."
Beyond increased flexibility in some cases, mortgage executives also say that the COVID-19 pandemic is sure to speed up the digitization of the sector.
Fercho with Flagstar Bank points out that the pandemic has brought upon a greater acceptance of things like online closings and notarization. Those are sure to remain in place beyond the pandemic, she said.
"This is really forcing the digitization of mortgage and I think it's a great thing for the industry," Fercho said. "And I think like many things with COVID ... this is just going to be the new way we do it."
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Mortgage sector ticks back up as companies go on hiring sprees - Crain's Detroit Business
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