Tom LaMalfa: May 2022 mortgage market survey results

Mortgage market survey May 2022 by Tom LaMalfa

Former MGIC VP Tom LaMalfa has surveyed mortgage industry executives twice a year since 2008. Having worked in the industry over 40 years, Tom has met hundreds of mortgage bankers. From those contacts he assembled a group of 35+/- experts to serve as a panel and address the survey questions. The surveys are conducted in conjunction with 2 annual MBA events, the National Secondary & Capital Markets Conference in May, and the Annual Convention in October. This is the 29th such consecutive survey.

In this latest survey, I asked 64 questions spanning an array of issues and topics to 32 senior executives at 32 different firms. The 32 firms consisted of 16 financial intermediaries and 16 IMBs (independent mortgage banks) of various production sizes, operating channels, places of domicile, and markets served (when not national firms). The panel of executives was designed to be a microcosm of the MBA’s lender members.

Looking at the findings as a whole, I see 4 key takeaways from the survey. Each is important in itself. (A link to the full Survey Report and Scorecard is included here for readers who would like to consider the scope of the survey and findings beyond what’s addressed in this post.)

Finding I – Demographic Profile

For me, the first takeaway was the demographic profile the 32 firms represented. Here’s what the median firm in the study looks like: The company produced $7.7B of mortgage loans last year, it operated in 2 of the 3 production channels, and it employed 1,050 people. Thus far in 2022 (through April), this “representative” firm originated 65% purchase business, 65% conventional GSE business, 20% government-insured, 14% non-agency jumbo, and, rounded up, 1% non-QM, non-prime. Over the year’s first 4 months, refi volume was down 60% on average for the 32 companies from the same period in 2021.

1.  What was your firm’s total production volume in all channels last year? $30.7b mean/$7.7b median

2.  In how many production channels does your firm operate? 2

3.  How many people does your mortgage company currently employ? 1,050

4.  What percent of your firm’s production is purchase business this year? 65%

5.  What percent of this year’s production is conventional GSE business? 65%

6.  Combined, what percent is FHA-/VA-/USDA-insured business this year? 20%

7.  What percent of this year’s production is non-agency jumbo? 14%

8.  What percent of your volume is non-QM or non-prime this year? 0%

12. By how much has refinance volume contracted at your firm this year? 60%

Finding II – Mortgage Company Workforce Data

From the survey we learned that on average, 15% of the 32 companies’ employees are in the office full time, and the balance are in the office part time. The bulk of the approximately 85% that are in the office part time are there less than 3 days a week. Meanwhile, about one-third of senior management are working from home 2 or more days per week. Further, it appears that few of these existing work force characteristics are expected to change much, at least not this year.

The often heard of battle for the top 20% sales talent, reportedly involving 5- and 6-figure signing bonuses and guarantees, prompted the question of whether the executives would confirm the third-party claims. It appears they can, with 23 of 32 respondents agreeing with the characterization as a frenzy for top LOs. Related, about twice as many executives acknowledged expanding their sales forces in recent months as not. Less sanguine, all 32 executives foresee sizeable staff layoffs this year. In fact, they’ve already begun in earnest.

15. What percent of your firm’s employees are currently in the office full time? 15%

16. Permanent WFH accounts for what percentage of your firm’s workforce? 40%

17. Are the other FT employees in the office more than 2 days/week or less than 3? M-9/L-20

18. Do you expect this percentage to change much by year end? Y-8/N-23

19. What percent of senior management currently works from home 2 or more days/week? 34%

20. The mortgage industry is said to be experiencing an LO recruiting frenzy. Agree? Y-23/N-9

13. Have you expanded your firm’s sales force in 2022? Y-21/N-11

21. Are sizeable layoffs of staff anticipated this year, industry wide? Y-32/N-0

Finding III – Executives’ Expectations

More than twice as many lenders as not expect to increase their MI-insured lending in 2022. The leading reasons being an anticipated increase in purchase business and the inability of many mortgagors to put down 20% of the purchase amount.

As for the economy, an overwhelming number of the executives see a recession arriving in the next 18 months (by the end of 2023), and an even larger majority see continued bond market volatility. A major reason for the bearish outlook is likely found in inflation, which recently hit a 40-year high of 8.3% (Consumer Price Index). Responses to whether inflationary pressures are expected to begin to subside by this fall were quite mixed, with a modest majority expecting better inflation numbers ahead.

This concern is evidenced by the high score given to the difficulty lenders expect to navigate where mortgage activity declines by 40 or 50% year-over-year. It’s also evidenced by the neutral ranking given in response to the question about how bullish they were personally on the outlook for the residential, i.e., single- and multi-family markets this year.

Related, margin pressure is widely seen as continuing ahead, leading to lower earnings and reduced revenue thanks to reduced refi activity. The bottom line is that a difficult year is expected in 2022, and this challenging environment is seen as leading to heightened M&A activity inside the industry; which in turn will result in, per the group consensus, an estimated 17.5% fewer firms at the dawn of 2024. Thus the industry’s somber mood as reflected in Q4’s mean response.

The best news found among the questions about the economy was that relatively few executives foresee a housing bubble developing this year that will end in a collapse in house prices, and that HPA (home price appreciation) will moderate from its recent torrid pace.

33. Do you expect to increase your firm’s MI-insured lending this year? Y-21/N-9

37. Do you expect a recession in the next 18 months? Y-28/N-3

38. Several economists are predicting a housing bubble. Do you see one in the next year? Y-8/N-24

39. Do you expect 2022 will see lots of M&A activity in the mortgage industry? Y-28/N-4

40. Do you expect the volatility in the bond market to persist this year? Y-30/N-2

41. Scaled 1-10, how difficult a year do you expect 2022 to be for lenders? 8

42. Scaled 1-10, how bullish are you on the outlook for the residential market in 2022? 5

43. Do you expect margin pressure to worsen as the year unfolds? Y-25/N-7

44. Do you expect inflationary pressures to begin to subside by the fall? Y-18/N-14

45. How much of a shrinkage do you expect in the number of lenders this year and next? 17.5%

46. By how much do you expect the industry’s revenue to decline this year from last? 47.5%

47. By how much do you expect the industry’s earnings to decline this year from last? 60%

49. Scaled 1-10, how would you rate the mood among mortgage executives today? 4

63. How much do you expect house prices to increase this year? 7%

Finding IV – Interesting Odds and Ends

Responses to 4 topics caught my attention and are thus noted to ascertain if you too are roused by them. The first was the return of the ARM and its potential for becoming a more important product for high-balance and jumbo loans, especially so if the yield curve steepens, allowing larger rate spreads between fixed and adjustable products.

A second attention-grabbing response was the stated importance of cost control this year. Rarely do specific questions get unanimous responses, but this one did. Everyone is tightening their belts. A third interesting response was the lenders’ assessments of home-buying consumers (as compared to all consumers) as healthy and strong. Executives’ assessments of the home-buying consumer are quite positive, likely supported by trends in consumer spending, savings rates, FICO scores, housing wealth, etc. Reportedly, there is consumption power among homebuyers.

The fourth and last interesting response was the conclusion that it is both a good time to buy -- or sell -- a mortgage company with a strong purchase business. That’s good news for the many owners contemplating retirement and with a fistful of money made in recent boom years. A lot of this type of talk was heard at the conference. Indeed, I’ve lost 3 of my panelists to retirement since last January.

9. Scaled 1-10, how important are ARMs in the jumbo market today? 6

10. Scaled 1-10, how important is the return of ARMs to the housing market? 7

32. Scaled 1-10, how important is cost control today and in the months ahead? 9.5

55. Scaled 1-10, how financially strong is the home-buying consumer today? 7

50. Is it a good time to sell a mortgage company with a strong purchase business? Y-23/N-9

51. Is it a good time to buy a mortgage company with a strong purchase business? Y-24/N-8

So there you have it, my take on the key findings from this latest survey. In sum, we can expect a challenging year, but one the industry has faced many times before, and survived.

Tom LaMalfa

Tom LaMalfa, President, TSL Consulting

Tom LaMalfa is a 40-plus-year veteran mortgage-market analyst and researcher. He has done pioneering work in the areas of secondary markets, wholesale mortgage banking, mortgage brokerages, financial benchmarking and GSE reform. He may be reached by e-mail at

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