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It’s no secret that trends within the mortgage and lending industries can fluctuate significantly from quarter to quarter. Countless factors such as the economy, new legislation, and changing demographics can impact these shifts. With the ever-changing financial landscape, we have pinpointed the most current and prevalent mortgage and lending trends of 2014.
Mortgage Volume Drops
Mortgage loan volumes have experienced a consistent drop across all lenders throughout 2014. In the first quarter, lenders made a total loan volume of $226 billion, an all-time low amount that hasn’t been achieved since 1997. One of the largest lenders, Wells Fargo, took the hardest hit with a 67% drop in originated residential mortgages.
One explanation for the steady decline in mortgage volume is due to the Federal Reserve’s mission to taper stimulus cash. As a result of the tapering, interest rates rose by a percentage point. The rise in interest rates has caused more people to become weary of refinancing which is correlated to the drop in mortgage volumes.
Rise in All-Cash Purchases
One variable has contributed significantly to the drop in the nation’s total loan volume: all-cash purchases. With rising interest rates, all-cash purchases have become a major contender among transactions in the housing economy. Interest rates are hardly the only reason though. Older generations are downsizing their current homes in favor of smaller homes. The switch to smaller homes has made all-cash purchases more feasible for the baby boomer generation.
Foreign investors buying property in the United States have also resulted in a large percentage of all-cash purchases. Buyers from China alone have spent $22 billion on properties in the United States. Foreign buyers tend to be members of the upper middle class and upper class of their respective countries. Waning economies and volatile political regimes have fueled many international buyers to make all-cash housing purchases in the more stable environment of the United States.
In the first quarter of 2014, all-cash purchases accounted for a record high of 43% of transactions. This trend in conjunction with tighter lending standards has predictably led to less lending. As far as domestic purchases are concerned, the all-cash trend could prove to be a temporary fixture as some lenders have joined a movement to lower lending standards. Lenders anticipate that looser lending standards will create a shift from skyrocketing all-cash purchases to more loans.
Paperless Options
Processes within the mortgage industry require a great deal of paperwork, as many people know. It is not unusual for cumbersome paperwork to prolong the process of closing a mortgage and processing miscellaneous loans. Although some measures have been taken to reduce waste, the U.S. Small Business Administration (SBA) and Fannie Mae are taking it a step further by implementing new programs and initiatives.
Maria Contreras-Sweet—24th Administrator of the SBA—recently announced an SBA agenda filled with new initiatives at the Center for American Progress in Washington, D.C. One such initiative includes the introduction of digital processes in favor of traditional yet time-consuming faxes and paperwork. The SBA will usher in a new era filled with electronic signatures and the ability to upload and generate documents. The switch is projected to save not only thousands of dollars but hours of time.
Fannie Mae has joined the digital trend and has commissioned a team to tackle common problems within the mortgage industry. The team identified a lack of electronic processes as the source of many issues within the industry. They found multiple solutions to amend the issue and say as much as $1 billion can be saved with electronic processes. The Consumer Financial Protection Bureau (CFPB) has also taken steps to evaluate what must be done to make an electronic switch. Although it could take years to apply the findings of both groups, it is clear that industries are finding the need to adapt to rapidly evolving technology.
The Decline of Negative Equity
Multiple reports have found that the percentage of total negative equity has decreased in the first quarter of 2014. CoreLogic reported 12.7% of mortgaged homes in the first quarter of 2014 as having negative equity which translates to almost 6.3 million homes nationwide. This statistic sharply contrasts to the 19.8% found in the first quarter of 2013 with 9.7 million homes ‘underwater.’
Nevada—the state with the highest incident of negative equity in residential properties—experienced a 16% drop in the amount of residential properties with negative equity when compared to the first quarter of 2013. Negative equity is forecasted to further decline as the year progresses and home prices steadily increase.
More Elderly with Debt
Elderly Americans carry more mortgage debt throughout their retirement years. An overwhelming amount of senior citizens—those 65 and older—not only have increased mortgage debt but increased credit card debt. The latest statistics provided by the Consumer Financial Protection Bureau (CBPB) reveal that from 2001 to 2011, the amount of elderly 
homeowners with mortgage debt increased by 2.3 million. Rising home values and the trend of people purchasing their first homes in the latter half of their lives all contribute to the increase in mortgage debt.
Purchases that contribute to credit card debt appear to be directly related to the relaxed lifestyle most people envision in their retirement years. The idea of retirement for many evokes thoughts of traveling, trying new hobbies, and enjoying leisure time in general. The top expenses among the senior citizen demographic include new automotives, recreational items such as technology gadgets and camping supplies, and miscellaneous purchases for pets.
Experts stress that aging generations must account for a shift in expenses as they reach their retirement years. For example, medical expenses will become a larger factor in a retirees’ budget than compared to someone in pre-retirement years. Experts stress that with careful planning and well-thought spending plans, the growing trend could lessen in the future.