Lenders, Loan Originators, and economists all over the country expect more margin compression and layoffs across the industry. It is expected that originations will decline even further due to the current tough economic situation affecting the industry. The markets have been rocked to their foundations.

The Consumer Price Index in the United States increased 8.6% year-over-year in May, 30 basis points higher than expected, causing stock futures to fall and bond yields to rise. The mortgage market has been thrown into turmoil as a result of this instability. Due to higher rates, decreased refi volumes, and the need to cut capacity, lenders expect 2022 to be one of the most difficult years on record. However, the market has worsened faster than anticipated, and some are battling to break even, particularly following this week’s sharp rate jump.

This year, lenders hope to profit by cutting expenses by up to 30% through renegotiation of worker contracts rather than through layoffs. According to Mike Fratantoni, Mortgage Bankers Association’s chief economist and senior vice president of research and industry technology, the Fed would have to raise short-term rates to close to 4% by early next year to reduce “abnormally” high, chronically high inflation, which will considerably impede the economy. Following the Fed’s action, the 30-year fixed mortgage rate will drop slightly from its current market high of 6%. What matters most is where the rates stop, and there’s a lot of ambiguity about that because it depends on the inflation data, according to Madhavi Bokil, senior vice president at Moody’s. To read more on this, click here.


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