Mortgage Industry Collapse 2020-2021?
Thinking about transitioning into commercial and residential loan origination, but am hesitant due to the economy's position in the debt cycle/the possibility that people may default on their loans as a result of COVID-19 and banks may go out of business.

On the other hand, home prices are going up, which would mean that mortgage brokers and bankers would collect higher fees if the lenders do issue loans and don't go out of business.

What are your thoughts on this? Is 2020 a terrible time to enter the mortgage industry? Any lessons learned from people who joined the mortgage industry in 2008 or 2009?
[{"id": "fwxhvv9", "text": "No, shit that\u2019s been originated is in workout - huge need on servicing side. Rates are crazy low so refi market is on fire right now for stuff that makes sense.", "replies": [{"id": "fwxiqm6", "text": "Really good point about the servicing. I'm sure that sector of mortgage business will boom. And yes - you're right about \"stuff that makes sense\", but lenders are already tightening their belt on lending policies to weed out the loans that *don't* make sense (e.g. only accepting lower LTV applications, requiring hire FICO scores, requiring higher cap rates on investment properties). Wouldn't that mean that fewer loans will be originated and you may end up doing far less business as a banker or broker?\n\nThat being said, with me transitioning into a new career, I'm okay with not making a ton of business my first year if it means that I'm setting myself up to grow with the market. But it really has to be a reasonable income in the beginning.", "replies": [{"id": "fwxw4d5", "text": "GSE origination is on fire. Look at that side.", "replies": [{"id": "fwxwp82", "text": "Are you referring to confirming/Fannie/Freddie loans? Is that because lenders offload the risk by selling them off in the secondary market?", "replies": [{"id": "fwyipgc", "text": "Yes FNMA/Freddie. All lenders offload risk - entire debt market is propped up by CLO /CMBS origination. \n\nIt\u2019s on fire because long term Freddie money is free right now, and multi family is the one if only a couple of \u201cbig\u201d commercial sectors that isn\u2019t a total dumpster fire. MF pricing is still wild and it\u2019s propped up by crazy cheap debt.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fwxi4cd", "text": "In the residential side, I think there will be demand for refinancing for a while as long as interest rates stay low. But I would expect demand for new loans will go down if uncertainty continues. I believe things have not spiraled due to Government money (PPP, stimulus check, additional $600 for unemployment). If that stops it will be bad.  \n\nIn commercial, I think all lenders are being very selective. My team is still looking at multi-family, but it would have to be a great property for industrial and office properties to be considered. Back in 2009 my previous employer stopped lending in Real Estate and focused solely on C&amp;I loans. I managed a team of underwriters back then and all of the applications I got were from CRE underwriters out of work.\n\nSource: Commercial Banker.", "replies": [{"id": "fwxjc8v", "text": "Totally agree. The Federal $600/week unemployment is supposedly ending end of July. There's a new round of EILD going around too now. I guess a lot will be revealed as the year progresses, but I can't imagine that the Fed is going to continue printing money for another full year. I think my main concern related to mortgages is the forbearance, eviction bans, rent deferments, and halts on rent increases. Don't you think that's going to result in some major defaults and possible lender bankruptcies?", "replies": [{"id": "fwzsm5o", "text": "Maybe in the non-institutional side but on the institutional MF side there have been 5 foreclosures on Freddie K series deals - ever. GSE loans are pretty conservative and debt is pretty cheap right now, even if your top line fell out you got bailed out by non floor I/o loans. Some of the heavy lift debt fund stuff might be shaky but unless you\u2019re in the middle of a renovation program you can\u2019t stop you\u2019re going to be able to drop rents enough to hold vacancy. \n\nAlso industrial remains strong, you can get loans on it if you have decent WALT.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fwxj6l0", "text": "I\u2019ve been on both the residential side and commercial side of a bank. I\u2019d recommend going commercial. Residential mortgage is very problematic because it is a consumer loan. The borrowers are not very sophisticated from my experience. There is less repeat business. Commercial you get repeat business from companies / developers. Also the loans are typically bigger in commercial. If you look at a bank revenues, commercial revenues is significant more than residential. Commercial is much more complicated because there are more assets classes compared to a SFH, townhome and condo.", "replies": [{"id": "fwxjx0q", "text": "Makes sense. The thing I'm seeing though is that home prices are rising and multi-family prices are falling. Homebuyers really are only concerned with their own ability to pay the mortgage, whereas multi-family/retail/office landlords have to worry about multiple tenants and their ability to pay rent. It seems to me that this creates much more uncertainty in the commercial borrowers than in residential borrowers. Thoughts?\n\nThat being said, I could see lending to industrial/warehouse investors being much more predictable in the current economy.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fwxx0pz", "text": "In 2021 you see Fannie Mae advertising negative mortgage rates.  Buy a house and get paid 2% a year for 30 years!", "replies": [{"id": "fwxxmsk", "text": "Have they announced this anywhere? That would be amazing for brokers since they get paid upfront, but it sounds pretty unlikely.", "replies": [{"id": "fwy0g36", "text": "I\u2019m just joking. Mainly since the last 20 years have been fueled by FED quantitative easing and artificially low interest rates. Once the world hits zero where can they go but negative??", "replies": [{"id": "fwy2f8y", "text": "Right. It's the whole \"pushing on a string\" concept once you hit 0%. That's when the only thing that the government can do is print money. I don't personally like that process, but Ray Dalio has a good explanation of this in the second half of this video.\n\nhttps://youtu.be/PHe0bXAIuk0", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fwym05v", "text": "The riskiest asset classes in commercial right now are hotels (minimal occupancy due to COVID) followed by retail, mostly mom and pops shops due to the exacerbate rise of Amazon -(also a result COVID)\n\nIt\u2019s really too early to tell in my opinion. loans payments are being deferred right now, both commercial and residential. There are companies that specialize in buying distressed assets who are waiting on the sidelines right now. There is not much movement in the market yet (from what I\u2019ve seen on the commercial side) because payments are still being deferred and investors don\u2019t want to pay pre COVID market prices given the uncertainty. They want a deal but can\u2019t get a deal yet since the assets underlying loan payments are being deferred.", "replies": [{"id": "fwynizr", "text": "Ranking them by risk, I would actually say it's hotels followed by office, since so many people are working from home - and I think that culture is going to persist to some degree after the pandemic.\n\nNot sure which post you were referring to with me mentioning multi-family. But to clarify, I think of loans associated with consumer/homebuyer/owner-occupied purchases just as \"home loans\", whether it's a single-family home or a condo/townhome. When I talk about loans for multi-family, I mean loans to buy a property with multiple residential units, whether it's a \"residential loan\" (i.e. 2-4 units; needs NMLS license) or \"commercial loan\" (5+ units/not owner-occupied).\n\nWith those definitions in mind, it looks to me like selling home loans could be relatively safe as a career for the next couple years. I'd be selling to people based on their personal income, which they would presumably be relatively certain of before buying the home. Selling loans for multi-family as a career seems riskier as lenders tighten up their lending guidelines and give out fewer loans due to possible tenant defaults/rent forgiveness/forbearance. Fewer loans sold = less business for the lenders = less job security for brokers/bankers. What do you think?", "replies": [{"id": "fwzsvfm", "text": "Yea no it\u2019s hotel followed by retail for riskiest assets. Always has and will continue to be so, COVID or not. Industrial / data center / multi are most risk off from credit perspective.", "replies": [], "depth": 3}, {"id": "fwzu66i", "text": "Two questions... if you go the residential route, I\u2019m guessing you want to be a loan officer to sell mortgages. \n1. Do you want to work for a bank or a non depository mortgage lender / mortgage broker?\n2. How do you plan on getting business as a MLO?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fwynf9y", "text": "I think there is uncertainty for both residential and commercial borrowers. It is difficult to underwrite deals right now unless the borrower has had little impact or little future impact as a result of COVID. \n\nI wish I could predict the housing market but it\u2019s a house of cards right now. Powell is going to do his best to keep the economy propped up until November.", "replies": [], "depth": 1}, {"id": "fx46v6e", "text": "The jobs are cyclic. I am afraid this is the wrong time to be able to do much mortgages.  The interest rates are lower which means if you have the right connections some past borrowers may be interested to refin.  As for home prices gone up, peak was 2+ years ago at national level. It has been flat to down over 2 years. With the unemployment we will see more bank owned properties again. \n\nThat goes with realtors. Paid managers, CEO etc are taking big pay reduction.  Redfin for example laid off 40% paid realtors this year. Coldwell Banker, C-21 ditto.  Many realtors are also licensed loan officers.", "replies": [{"id": "fx48bkh", "text": "Totally see what you're getting at. I'm much more concerned about deal volume than deal size. I'm not expecting to make a killing in a down market, but I want to make sure I can actually sell loans at all. Do you think people will be buying homes, albeit at a discount?", "replies": [], "depth": 2}], "depth": 1}]