Condo and Vacation Home Loans Can Boost Mortgage Market
Written By: Joel Palmer, Op-Ed Writer
Industry experts believe sales of condos and vacation homes can help keep mortgage processors and underwriters busy during the current mortgage market.
The mortgage market is going through an unusual period to say the least.
On the one hand, the country is undergoing an unprecedented pandemic that led to a surge in unemployment and business closings earlier this year. Yet the country has been recovering from the early months of COVID-19, and the housing market has remained robust.
There remains strong demand for housing and for home refinancing, especially with mortgage rates reaching another all-time low this week. Yet the supply of home for sale remains at historic lows and millions of homeowners who could potentially benefit from refinancing are not taking advantage.
So it’s not surprising that people within the mortgage industry are looking for alternatives to standard purchase and refinance mortgages to keep business flowing.
Last week Fannie Mae provided insights on the role condominiums can play in dealing with the lack of supply for affordable housing.
According to the latest home sale data from the National Association of Realtors (NAR), existing condo and co-op sales rose 6.3 percent between August and September. In addition, September 2020 condo sales jumped 13.6 percent from September 2019, and the median sale price increased 9.9 percent from a year ago.
According to Fannie Mae, condo sales make up about 8 percent to 10 percent of the mortgage market.
In early August, Fannie Mae surveyed over 200 senior mortgage executives, via the Mortgage Lender Sentiment Survey®, about opportunities in the condo market.
The survey showed 86 percent of respondents originate single-family condo mortgages. In addition, lenders originating condo mortgages found the market relatively active, with 71 percent expecting their share of condo loans – as a percentage of total loan volume – to remain about the same. Approximately 40 percent reported having dedicated condo project-approval teams.
Lenders were asked how to improve the condo underwriting process. Sixty percent of respondents said secondary-market investors should pay more attention to homeowner association (HOA) financial instability.
Mortgage lenders said the biggest opportunities for process improvement were the overall loan origination process, borrower income validation, appraisal, and loss mitigation workout.
Mortgage underwriters and processors have also been working more on financing for vacation homes, according to the latest analysis from NAR.
NAR said sales in vacation destination counties have seen a strong acceleration since July, with a 34 percent year-over-year gain in September.
"The uncertainty about when the pandemic will end coupled with the ability to work from home appears to have boosted sales in summer resort regions, including Lake Tahoe, mid-Atlantic beaches (Rehoboth Beach, Myrtle Beach), and the Jersey shore areas," said Lawrence Yun, NAR's chief economist.
Additionally, a recent NAR study confirms that many Americans continue to seek new living situations due to the coronavirus pandemic.
According to NAR, total existing-home sales rose 9.4 percent from August to September and nearly 21 percent year-over-year.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
