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Mike Fratantoni on MBA’s 2022 mortgage market forecast

The MBA 2022 forecast includes higher mortgage rates, more purchase volume and tighter margins for lenders.
The post Mike Fratantoni on MBA’s 2022 mortgage market forecast appeared first on HousingWire.



The last two years have been a wild ride. We’ve had the sharpest and yet also the shortest recession in history, record-low mortgage rates leading to record origination volumes, and record home prices as housing demand far outstripped supply. Let’s not forget the substantial fiscal and monetary policy that provided extraordinary levels of support for households, businesses, and markets here and abroad.

The latest news regarding the Omicron variant has many cautious about whether the recovery that began in the second half of 2020 and blossomed in 2021 can continue. Odds are that this turn in the pandemic will likely be just a temporary setback. Public health officials note that we have many more tools to address this latest — and likely not the last — challenge.

Nevertheless, while we view the trends described below as the most likely path for the economy and mortgage market in 2022, this news highlights the elevated level of uncertainty we’ve all been living with the past few years. The pandemic, as well as policymakers, continue to have the ability to send shocks through the system.

The main takeaway from Mortgage Bankers Association forecast is that we see 2022 as a transition year, moving from a refinance market to a purchase market. Industry veterans know that past similar transitions have posed challenges as the industry works to match origination capacity to the new level of demand. A silver lining is that we are expecting both 2022 and 2023 to be record years for purchase originations.

In thinking about the year ahead, I am going to frame my comments around five questions I often hear from lenders.

How will the Federal Reserve respond to economic developments in 2022, and what will be the impact on mortgage rates?

The Federal Reserve aims to meet three goals: reach full employment, keep inflation low and maintain a stable financial system. More specifically, that means targeting an unemployment rate close to 4%, inflation close to 2%, and using regulatory tools to prevent unsound lending or other financial imbalances.

In response to the pandemic, the Fed brought short-term rates to zero while also more than doubling the size of their balance sheet, adding trillions of dollars in Treasuries and MBS to their holdings.

When this article was published, the unemployment rate is at 4.2%, inflation is above 6%, and both stock market and housing market values are elevated. MBA forecasts that the unemployment rate will dip below 4% next year, ending the year at 3.5%. Businesses across the country have more than 11 million job openings and are raising wages to try to fill them. 

The only outstanding question is to what extent individuals who have dropped out of the labor force will be pulled back in as employers continue to push up their offers. Given that the decline in labor force participation has been largest for older workers, some of whom may have retired, at least temporarily, it may take more than a small raise to draw them back into the job market. 

The improving job market is all to the positive. However, inflation running much higher than the Fed’s target is troubling, as higher inflation expectations are getting baked into consumer and business decision-making. The Fed and other central banks around the world are already responding to this trend with their words and are beginning to change their actions. The Fed began to taper their asset purchases in November, and at their December meeting announced that they would double the speed of their taper beginning in January, which means they will no longer be adding to their MBS holdings after March.

Also at the December meeting, the median FOMC (Federal Open Market Committee) member indicated three rate hikes in 2022, although this is dependent upon a forecast of still strong growth and elevated inflation. Lenders should expect a much faster pace of hikes over the next few years than what was experienced following the 2009 recession.

A more hawkish Fed, a strongly recovering economy, and large federal budget deficits are all likely to put upward pressure on longer-term rates, including mortgage rates. MBA forecasts that 30-year mortgage rates, averaging about 3.3% today, will reach 4% by the end of 2022.

Source: FOMC Summary of Economic Projections, December 2021

Will home price growth slow in 2022? (What if it doesn’t?)

While the market has struggled with a lack of inventory in 2021 and builders have reported ongoing supply chain challenges, there are more than 700,000 homes under construction right now, and a growing inventory of new homes for sale. The inventory of existing homes remains quite tight at less than 2.5 months, but the addition of new homes to the mix should lead to more choices for potential buyers in 2022, including many who had hesitated to list their homes in 2021. This should lead to an increase in the number of existing homes listed.

This additional inventory is sorely needed. In the most recent readings, home prices nationally have been increasing at about an 18% rate compared to last year, with double-digit growth in almost every part of the country, and growth even faster in parts of the Mountain West. Per the chart below, this rate of growth is more than four times the pace of income growth. That’s clearly not sustainable, particularly for potential first-time homebuyers. 

While existing homeowners can cash in their equity gains and use that gain toward a down payment for their next home, first-time buyers are seeing their chance to buy decrease, or at least are having to re-think the types and locations of properties that they might be able to afford.

The encouraging news? MBA’s forecast for an increase in housing starts and home sales, coupled with our expectation of somewhat higher mortgage rates, should together lead to deceleration in home-price growth to around 5% in 2022. Note that this is a deceleration — a slowing in the rate of growth, not a decline in the level of home prices. 

Could home prices actually decline next year? Yes, if we were to get a spike in mortgage rates or some other shock that leads to an abrupt drop in demand right when the new supply arrives. However, I am frankly less worried about that scenario, and more worried that for other reasons, perhaps ongoing supply-chain constraints impacting homebuilders, the additional supply does not arrive. In that case, there is certainly a chance that home prices could continue to rise at unsustainable levels, increasing the risk that the market could run into a wall at some point next year with respect to purchase demand, showing up as a sharp drop in purchase applications.

Sources: BLS and FHFA

Will we really move into a purchase market next year?

Refinance volume will have totaled more than $5 trillion between 2020 and 2021, roughly half of mortgage debt outstanding, and representing 15 million refinance loans. Of course, that means that 15 million homeowners now have remarkably low mortgage rates. Will those who did not refinance when rates were below 3% be interested in doing so if rates rise to 4%? While there will be borrowers who will be interested in cash-out refinances given the rapid growth in home equity the past few years, MBA is forecasting a sharp drop in total refinance volume in 2022 and expects that volume to stay lower in 2023.

However, while total origination volume is forecast to drop from $3.9 trillion in 2021 to $2.6 trillion in 2022, perhaps the bigger shift is the transition from a refi to a purchase market. Purchase loans present different challenges and opportunities for lenders, both in respect to the mix of business and the need to maintain strong relationships with real estate agents, builders, and others in the housing market.

Given our outlook for home sales and housing starts outlined earlier, MBA forecasts a record year for purchase volume in 2022, driven by millennials reaching peak first-time homebuyer age, a strong job market, and continued increases in home prices.

Source: MBA Forecast

Will there be an increase in foreclosures next year as the remaining borrowers in forbearance exit?

When the unemployment rate spiked to almost 15% last year as the economy was shut down to protect against the first wave of COVID-19, policymakers and servicers moved incredibly quickly to offer forbearance to millions of homeowners. In June 2020, more than 8.5% of all homeowners with a mortgage were in forbearance. While mortgage delinquency rates spiked in concert with the jump in the unemployment rate, these forbearance plans and foreclosure moratoria enabled homeowners impacted by the pandemic to weather the storm.

The foreclosure moratoria have now been lifted, and many homeowners are reaching the expiration of their forbearance terms. Most borrowers exiting forbearance to date have been able to resume making their original payments, while some borrowers have entered modifications, needing lowered payments for a time. MBA’s Weekly Forbearance and Call Volume Survey and new Monthly Loan Monitoring Survey track the performance of these workouts, which have been positive thus far.

Prior to the pandemic, foreclosure levels were extremely low. In 2021, with the moratoria in place, they dropped even lower, with foreclosure starts and foreclosure inventory rates at or near all-time lows. These levels are bound to increase to some extent, but given the success of forbearance exits thus far, we expect the levels to remain extremely low in 2022.

Source: MBA’s National Delinquency Survey

With the expected decline in origination volume next year, will margins tighten (further)?

2020 was a record origination volume year and a profitable year for mortgage originators, as shown by the triple-digit margins in MBA’s Quarterly Performance Report data. As had been typical in prior refinance waves, when the industry is operating at or beyond capacity, margins increase, but this time, expenses were elevated as lenders moved to remote work and staffing shortages abounded across many roles.

In 2021, as refinance volume crested and began to wane, margins have trended downwards as well. The higher personnel and operational costs taken on to meet the record volume remain, but the industry now has some extra capacity, and that is showing up as a drop in margin. It is important to highlight that the third quarter of 2021 margin of 89 basis points is still above the historical average of 56 basis points, when looking at data going back to 2008.

Of course, purchase volumes display large seasonal swings, leading margins in the fourth and first quarters of each year to typically be much lower than those in the middle of the year.

While MBA does not forecast industry-level margins, it is reasonable to expect more tightening in the year ahead given our forecast of a move to a purchase market coupled with a sharp drop in refinances.  We’ve already seen tightening to an even greater extent in third-party channels, as lenders lean more heavily there, perhaps to make up for lost volume through the retail channel. If we look back to 2018 or early 2019, there’s typically a time of below-average profitability as the industry right-sizes following a refinance wave.

Source: MBA’s Quarterly Performance Report

2022 should be a year of higher mortgage rates, fewer refinances, more purchase volume, a more sustainable rate of home-price growth, an increased, but still low level of foreclosures, and tighter margins for originators. This part of the cycle is always a challenge for lenders, but mortgage bankers have been through this before.

The post Mike Fratantoni on MBA’s 2022 mortgage market forecast appeared first on HousingWire.

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The 2022 Best Countries Report Ranks Switzerland as No. 1 in the World

The 2022 Best Countries Report Ranks Switzerland as No. 1 in the World
PR Newswire
WASHINGTON, Sept. 27, 2022

Quality of life factors as most important for rankings.
WASHINGTON, Sept. 27, 2022 /PRNewswire/ — Switzerland returns to the top spot in …



The 2022 Best Countries Report Ranks Switzerland as No. 1 in the World

PR Newswire

Quality of life factors as most important for rankings.

WASHINGTON, Sept. 27, 2022 /PRNewswire/ -- Switzerland returns to the top spot in the overall 2022 Best Countries, a ranking and analysis project by U.S. News & World Report; BAV Group, a unit of global marketing communications company WPP; and the Wharton School of the University of Pennsylvania. 

Now in its seventh year, Best Countries evaluates 85 countries across 73 attributes. Attributes were grouped into 10 subrankings, including entrepreneurship, agility and social purpose. Quality of life became the most heavily weighted subranking this year, as determined by the most recent gross domestic product per capita data. 

"The Best Countries rankings are designed to help policymakers and residents identify how perceptions affect their country's standing among other nations," said Kim Castro, editor and chief content officer at U.S. News. "Having quality of life as the top subranking demonstrates that elements such as a good job market, affordability, political stability and well-developed health and education systems are playing an increasingly important role in shaping a country's global image." 

For the fifth time, Switzerland claimed the No. 1 spot, with Germany coming in at No. 2, followed by Canada at No. 3. The United States moved up two positions to No. 4, followed by Sweden at No. 5.

Key themes from the 2022 Best Countries Report:

  • Switzerland returns to No. 1. The country, which held the top spot from 2017 to 2020, scored well on quality of life and social purpose attributes. It is also perceived as a country that cares about human rights, as well as gender and racial equity and the environment.
  • The Russia-Ukraine War influenced perceptions of those two countries and neighboring nations. Russia dropped to No. 36 in the Best Countries overall rankings, while Ukraine moved up to No. 62. Poland, Lithuania and Romania also moved up in the rankings.
  • The fear of rising inflation and economic decline is a top concern. Eighty-five percent of survey respondents believe inflation will worsen. Among survey participants, 58% agree with the statement, "I am willing to pay higher prices if it helps put more economic pressure on Russia."
  • COVID-19 continues to factor into perceptions of health care. Seventy-nine percent of respondents agree with the statement, "I approve of my country's efforts to protect its citizens from the COVID-19 pandemic," while only 65% agree with the statement, "I trust my government to take care of my health and safety."
  • There is a desire for global leadership – as well as female leadership. Eighty-nine percent agree with the statement, "We need leaders that think beyond their own borders or their own self-interests," while 69% agree that "countries led by women tend to be better managed," up 1.4 points from last year.

"This year we can truly see the growing significance of soft power over traditional forms of hard power when rating a country's standing in the world," said John Keaveney, advisor at BAV@WPP. "With the rise of importance in quality of life and social purpose in the Best Countries analysis and the declining prominence of military and economic might, we can see how much the general attitudes of the world are changing, and what nations need to consider."

The 2022 Best Countries rankings methodology is based on a proprietary survey of more than 17,000 global citizens from 36 countries, including business leaders, college-educated individuals who are middle-class or higher; and general citizens who are nationally representative of their country.

"In general, countries do not shift to any great degree from year to year," said David Reibstein, professor of marketing at the Wharton School. "But in 2021 and 2022, we witnessed more turmoil than in any of the previous seven years of this study, resulting in more change in how people viewed countries. Perhaps the greatest shakeup influencing the rankings this year is the conflict in Ukraine, the insecurity within Europe itself, the threat of possible nuclear confrontation and the total disruption of energy supplies."

The Best Countries rankings are part of U.S. News' government rankings initiative, which measures government performance at the international, state and local levels and includes the Best States and Healthiest Communities projects.

2022 Best Countries Rankings
See the full rankings here.


  1. Switzerland
  2. Germany
  3. Canada
  4. United States
  5. Sweden
  6. Japan
  7. Australia
  8. United Kingdom
  9. France
  10. Denmark

Most Powerful

  1. United States
  2. China 
  3. Russia

Most Agile   

  1. United States 
  2. Germany
  3. Canada

For Social Purpose

  1. Sweden
  2. Norway
  3. Denmark

For Women 

  1. Sweden
  2. Norway
  3. Finland

Most Forward-Looking

  1. Singapore
  2. Japan
  3. United States

For Racial Equality

  1. Netherlands
  2. Sweden
  3. Norway

For more information, visit Best Countries and use #BestCountries on Facebook and Twitter.

About U.S. News & World Report
U.S. News & World Report is the global leader in quality rankings that empower consumers, business leaders and policy officials to make better, more informed decisions about important issues affecting their lives and communities. A multifaceted digital media company with Education, Health, Money, Travel, Cars, News, Real Estate and 360 Reviews platforms, U.S. News provides rankings, independent reporting, data journalism, consumer advice and U.S. News Live events. More than 40 million people visit each month for research and guidance. Founded in 1933, U.S. News is headquartered in Washington, D.C.

About BAV Group
BAV Group is a global consultancy with expertise in consumer insights and brand marketing strategy. Using BrandAsset® Valuator, a proprietary brand management tool and global database of consumer perceptions of brands, BAV informs strategic and creative solutions that drive business results. Over 29 years, BAV has captured data and consumer insights on more than 60,000 brands in 50+ countries around the world, evaluating 75 brand image and equity dimensions that matter. BAV Group is a unit of global marketing communications company WPP. Visit to learn more.

About the Wharton School
Founded in 1881 as the world's first collegiate business school, the Wharton School of the University of Pennsylvania is shaping the future of business by incubating ideas, driving insights, and creating leaders who change the world. With a faculty of more than 235 renowned professors, Wharton has 5,000 undergraduate, MBA, executive MBA, and doctoral  students. Each year 13,000 professionals from around the world advance their careers through Wharton Executive Education's individual, company- customized, and online programs. More than 104,000 Wharton alumni form a powerful global network of leaders who transform business every day. For more information, visit

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SOURCE U.S. News & World Report, L.P.

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With 20% of Retail Banks Planning to Significantly Increase Spending on ESG, Sustainability Is the Next Frontier for Competitive Advantage

With 20% of Retail Banks Planning to Significantly Increase Spending on ESG, Sustainability Is the Next Frontier for Competitive Advantage
PR Newswire
BOSTON, Sept. 27, 2022

New Report from Boston Consulting Group Finds ESG-Related Products in Core…



With 20% of Retail Banks Planning to Significantly Increase Spending on ESG, Sustainability Is the Next Frontier for Competitive Advantage

PR Newswire

New Report from Boston Consulting Group Finds ESG-Related Products in Core Business Lines Could Generate Substantial Revenue for Retail Banks

BOSTON, Sept. 27, 2022 /PRNewswire/ -- Interest in sustainability has been rising for several years, and concerns over climate change have become decision drivers for customers, investors, and policymakers. Retail banks are responding by building sustainability into their digital transformation programs. Three-quarters of retail banks plan to increase spending on environmental, social, and governance (ESG) initiatives, almost 20% of them significantly, according to a new report by Boston Consulting Group (BCG) being published today.

The report, titled Global Retail Banking 2022: Sense and Sustainability, reveals that one-quarter of retail banks report that ESG is a primary focus area for their digital transformation, and another 38% say that ESG is a key criterion in selecting and prioritizing digital transformation initiatives. Nearly half of retail banks are primarily focused on environmental sustainability issues, such as reducing energy consumption in offices, and 60% are prioritizing governance issues, including managing critical risk incidents, building cyber-resilience, and developing predictive risk analytics to ensure improved preparedness and mitigation.

"Sustainability has moved up the priority list for all stakeholders, making it the next frontier of competitive advantage for retail banks and a pillar for future growth," said Thorsten Brackert, a BCG partner and director and coauthor of the report. "In addition to promoting sustainable behaviors by customers, ESG-related products could generate considerable returns for retail banks. A 20% ESG-related share in new retail banking revenues in the next five years, for example, would result in about a 10% share of total retail banking revenues—or about $300 billion—in 2025."

A "Good Friend" to Consumers

BCG's 2021 retail banking consumer sentiment survey, which covered 25 countries, found that 20% more people voiced increased trust in their bank during the COVID crisis than at the start of the pandemic in 2020. While most customers say they have two or three banking relationships, a large majority (70%) still secured their last product from their primary bank. Customers want their banks to feel like a "good friend" (31%) that they can turn to for honest advice, and a "school" (11%) where they can obtain financial guidance. When it comes to keeping personal data secure, customers trust their banks even more than their doctors, and four out of five customers are willing to disclose more data to their banks if they value a new service or feature.

Strong Industry Trends Will Fund ESG Investment

According to the report, global retail and private client revenues are expected to grow at more than 6% a year through the 2020-2025 period. Regionally, revenues in Asia Pacific should rise the fastest, at an estimated 7.8% a year, followed by the Middle East and Africa (7.7%) and Latin America (6.9%). North America and Europe will grow more slowly but still at rates of more than 5% a year. While North America generated the biggest share of revenues in 2020, it is in the process of being overtaken by Asia Pacific.

Payments and deposits will be the leading drivers of revenue growth globally, with payments expected to grow at an annual rate of 6.3% as more people opt for online, credit card, and other non-cash transactions. Consumer and other retail loan revenues should rebound to growth rates of around 4% as customer spending increases while COVID recedes. Investments will grow attractively, at more than 5% a year, while mortgage growth will be muted as interest rates rise.

The Sustainable Retail Bank

Banks have many opportunities to innovate sustainable practices and products along the customer lifecycle and to practice good business in the process. One opportunity is through green mortgages, which provide discounts on interest rates or fees to purchasers and builders of energy efficient properties. Banks can also use the daily banking relationship as well as their personalized engagement capabilities to support customers in environmentally friendly and ethical living. In the US and UK, almost nine in ten consumers would like brands to help them become more environmentally friendly.

"Retail Banks have a critical role to play as societies and their institutions address social and environmental challenges," said Sam Stewart, global leader of BCG's retail banking segment and coauthor of the report. "As they consider a redirected future, retail banks should ask themselves a couple of existential questions: What will our customers be looking for beyond straightforward financial products and services in the next few years? And how can we align our business goals with meeting those needs before our competitors do so first?"

Download the publication here:

Media Contact:
Eric Gregoire:
+1 617 850 3783 

About Boston Consulting Group

Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.

Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.

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SOURCE Boston Consulting Group (BCG)

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NYC Office Space Glut Made Worse By Remote Work As Older Towers Face High Vacancy

NYC Office Space Glut Made Worse By Remote Work As Older Towers Face High Vacancy

Is New York City’s central business district finally recovering…



NYC Office Space Glut Made Worse By Remote Work As Older Towers Face High Vacancy

Is New York City's central business district finally recovering after Covid-19? The simple answer is no. Although residential rents in Manhattan were inflated to record highs, the rise of remote work quelled any recovery for the office space market in the borough. 

Bloomberg reported blocks of decades-old office buildings sitting partially empty are becoming a multibillion-dollar problem for building owners. 

Even though Goldman, Morgan Stanley, and other Wall Street firms have pushed for a return to the office after the Labor Day holiday, NYC's office-occupancy trends are still below half, according to card-swipe data provided by Kastle Systems. 

Office vacancy rates have skyrocketed in NYC and other major cities worldwide, though it appears the US will have a slower office-market recovery -- this is likely due to persisting remote working trends. 

Columbia University and New York University released a report that found remote work trends could force companies to reduce office space. They said lower tenant demand could result in a 28%, or $456 billion loss in the value of offices across the US. About 10% of that comes from NYC. 

Partially empty office towers are leading to slower economic recovery in NYC. Many buildings with high vacancy rates were constructed between 1950-80 and had no meaningful upgrades. 

The area is clustered with buildings from the 1950s to 1980s, many of which haven't been meaningfully upgraded in decades. The few that have been renovated struggle to compete with counterparts in tonier addresses on Park, Fifth and Madison avenues and new mega-developments on Manhattan's far west side.

The Third Avenue buildings have become "leave-behind space" rather than the types of offices that attract world-class tenants, said Nick Farmakis, vice chairman at Savills. -- Bloomberg

The picture remains cloudy for NYC because converting office space buildings to residential is challenging and expensive. Manhattan has had some conversions, but owners and developers are met with many challenges of zoning and architectural restrictions. 

"The problem with Midtown is a lot of buildings need air and lights that the city requires, and you don't always get that," said Ran Eliasaf, founder and managing partner of investment firm Northwind Group, which is exploring residential conversions in the city. "Not every Class B building is an ideal target for conversion."

Older buildings are also being left behind as businesses desire newer ones or relocate out of the city. This leaves NYC with a rising number of older office buildings with high vacancy rates and has begun to impact how much property taxes the city brings in. 

New York, like other cities, relies heavily on property taxes to fund schools, police and firefighters, as well as other services. Property taxes are the biggest source of revenue for the city, delivering about $1 out of every $3 taken in. And offices account for about a fifth of that.

Before the pandemic, the levies had climbed by about 6% a year on average, driven by rising property values. That helped finance new programs and services, as well as keep up with rising labor costs, said Ana Champeny, the vice president for research at the Citizens Budget Commission, a nonpartisan budget watchdog and research firm.

Manhattan's major office districts were no exception, generating steadily more revenue. But, in the fiscal year that ended June 30, the first to take into account the impact the pandemic had on real estate, tax levies from those areas declined by 11% to $5.24 billion.

The biggest drop was in a part of Midtown East north of Grand Central that the city's Department of Finance calls "Plaza," which contains some of the Third Avenue properties.

-- Bloomberg 

The takeaway is that NYC has too many old office buildings that are no longer appealing to companies because of various factors due to remote working and the desire for new shiny new towers with top-of-the-line amenities. 

Remember, we've pointed out There's An Amazing Glut Of Office Space In Every Major Metro Area and Office Space Market Faces "Economic Downturn" Due To Perfect Storm Of Factors

Tyler Durden Mon, 09/26/2022 - 20:40

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