It’s been a challenging year to say the least. Despite all the disruption COVID-19 has caused in the mortgage, title and real estate industries, it’s important to remember that we have weathered challenging times before. History also tells us that times like these are often a catalyst for innovation, growth and positive change. Because we could all use more good news, this article will highlight some of the recent silver linings in real estate.
After struggling with adoption of digital transformation over the past decade, COVID-19 gave us the push we needed to embrace change. Before the pandemic, remote online notarization (RON) and in-person (IPEN) digital closings were gaining popularity among lenders, settlement agents and consumers but were not widely available. When stay-at-home orders and social distancing guidelines were issued, it became clear that something drastic had to change to keep business going. RON digital closings provided a readily available, no-contact alternative for home buyers and sellers, while IPEN digital closings offered them the ability to enjoy a faster closing and limit contact with the settlement agent.
When the pandemic hit, 16 states had effective RON legislation on the books. Of the 34 states that did not, all but three passed executive orders that temporarily permitted the practice or accelerated permanent implementation of RON so Americans could safely continue with closings on their properties. We also saw greater utilization of digital closing platforms that helped consumers save more time and settlement agents handle more volume than the paper-based process.
In May, the American Land Title Association reported that the number of companies capable of performing digital mortgage loan closings nearly doubled since fall 2009. This summer, MERSCORP Holdings reported three consecutive record-breaking months of eNotes recorded. August generated 45,418 eNotes, signaling that investors have finally started to accept them after 20 years on the market.
Now that more lenders and settlement agents have been exposed to the many benefits of digital transformation, and consumers continue to demand speed and simplicity, increased adoption of these technologies is likely to continue.
The Refi Boom
In March, the Federal Reserve (the Fed) slashed the federal funds rate by 1.5%, to a range of 0% to 0.25%. This rate is what U.S. banks charge one another to lend money overnight and directly affects short-term consumer interest rates, including mortgage products. Additionally, the Fed began purchasing mortgage-backed securities (MBS), also known as quantitative easing (QE). Both factors have significantly decreased mortgage rates, which have hovered around 3% on a 30-year fixed-rate mortgage and sparked the largest refinancing (refi) boom in 17 years. Fannie Mae recently estimated that refis will generate $2.4 trillion in originations this year.
Refinancing at historically low rates can potentially help homeowners shave hundreds of dollars off their monthly mortgage. It also allows them to continue building wealth when they need it most. With interest rates expected to remain low throughout 2023, refis are also keeping business strong for lenders, title companies and others involved in the refinancing process.
Stronger than Expected Housing Market
When the pandemic hit just two weeks before the first quarter ended, the real estate industry braced for an abysmal second quarter – and breathed a collective sigh of relief by June. This summer’s surge in existing home sales likely stems from pent-up demand and record low interest rates. It’s also a testament to the resilience of title and real estate professionals who adapted quickly and have served without hesitation throughout the pandemic.
According to the National Association of REALTORS®, August sales were up 10.5% year-over-year and contributed to the highest number of home sales since December 2006. Many sellers are still seeing their homes go under contract in record time, suggesting continued demand. If this year’s lack of in-person school requirements remove concerns about moving during the school year, it could also fuel a stronger-than-usual fall and winter selling season. We can all take pride in the role the residential housing sector has and continues to play in advancing economic recovery.
Despite everything 2020 keeps dishing out, it’s important to remember this too shall pass. Until it does, we can take comfort in the silver linings and seize opportunities that will lead to a brighter future.