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On today’s episode, Editor in Chief Sarah Wheeler talks with Marina Walsh, vice president of industry analysis at the Mortgage Bankers Association, about the MBA’s housing market outlook delivered at the MBA Servicing conference.
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To learn more about Trust & Will visit trustandwill.com
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.
Related to this episode:
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will visit trustandwill.com
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.
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NewsTranscript
00:08Welcome, everyone. My guest today is Marina Walsh, Vice President of Industry Analysis
00:13at MBA. And we are here in person at the MBA Servicing Conference to talk about her housing
00:19market outlook. Very excited to dive into this. First, I want to say thank you to our sponsor,
00:25Trust in Will, for making this episode possible. Marina, thank you for being here.
00:28Sarah, it's always a pleasure to join you.
00:31Well, we're thrilled. I wanted to talk to you about the market update that you gave today.
00:37Overall, what's the high-level message here?
00:41The high-level message is that we're expecting originations at least to increase a bit by 8%
00:49to $2.2 trillion. So that's good leading into it. But the whole idea of a K-shaped economy,
00:57I think, is alive and well. There are certain groups that are doing very well. Certain people
01:05are doing very well. High-income, they've made a lot of money in the stock market.
01:10They've accumulated home equity. Perhaps they got their mortgage pre-pandemic. They're doing really
01:16well. But then you have the others that are really struggling. They may have additional consumer
01:21debt. Consumer delinquencies are moving up a bit. So it's a little bit of a mixed picture in terms of
01:30what's happening. Certain sectors, like health care, doing very well. Others aren't. So it's not
01:36a clear, it's not sort of a clear path forward, I would say, in terms of where things are heading.
01:42You see that in the labor data, right? You see the labor data where healthcare had a great 2025,
01:47if you want to look at that. Other sectors not. And of course, those are the consumers that we're
01:53all selling to. That's exactly right. It's different based on age, too. Obviously, the college graduate
02:00is not necessarily thinking about buying a home. But that sector, those recent college graduates,
02:08the unemployment rate is really high. So that could have repercussions further down the way
02:12in terms of mortgage. Yeah, I think I've been reading that the recent college grads,
02:18it's kind of a very tough market for them. Oh, Sarah, I can tell you about it. I have a
02:22college
02:23senior who had a second job trying to get a job in addition to his schoolwork. But happy to report
02:30he did get a job. But yeah, it's tough out there. That is happy news. So one of the things
02:37that people
02:37think about right now, and obviously have for the last couple years, is that rising FHA delinquency,
02:44right? So we'd love for you to talk a little bit about that, and what you see there, and why
02:48there
02:48is that, you know, bigger gap now between FHA and conventional. Yeah, I mean, that gap between FHA
02:55and conventional is sitting at almost, it's pushing 900 basis points. And the FHA rate,
03:03if you don't consider that COVID period of time, when delinquencies really peaked, you'd have to go
03:11back to 2011, 2012, to get to that level, you know, of about 11.5, a little higher than that
03:19FHA delinquency.
03:21So the question is, is it going to stay like this? What are the causes? And one of the causes,
03:30obviously, is just the change in the FHA loss mitigation protocols. So we used to have these
03:39COVID protocols that were finally sunset at the end of September. So that makes some difference. But
03:46we were seeing delinquencies going up even before that. So there's more involved. And that leads to
03:52our discussion about, you know, the the labor market, and who's most affected by it. And or
04:00another big factor in in these delinquencies is when the borrower got their mortgage. So if they got it
04:10in 2020 2021, when mortgage rates were a lot lower, then we're seeing lower FHA delinquencies in certain
04:18years, versus when they were really stretched and just barely got into that home. And so any little
04:28or big life event can really trigger a delinquency. Which makes so much sense. What do you think people
04:34should be looking for in their portfolio? What what should they be looking out for? Really pay attention
04:39to the state by state information. I always I use the example of my hometown, which is called the DMV
04:50district, Maryland, Virginia, and how different the FHA delinquency rates are between those three areas
04:58that you you'd think that they'd be similar, but they're not. And so looking at the state by state
05:04information, looking at what's happening in terms of the economies in those particular states. Obviously,
05:11you got to pay attention to property insurance and taxes in each state. That's going to be a layering
05:18stress. I don't think that's exactly cause a cause of delinquency, but it's an additional stress. If
05:26a borrower experiences any other type of financial hardship, I think that's a factor.
05:35So are we seeing, I went to the session yesterday, too, on FHA, VA, and with Jenny May, and they
05:41talked
05:42about the serious delinquencies is where we're seeing some of the stress the most.
05:47And we're seeing the same thing in our national delinquency survey data, where the 30s and 60s
05:55have moderated a bit over the last few quarters. And it really is the seriously delinquents. Now,
06:02some of those seriously delinquents could be in a trial payment plan right now. And so they just have
06:09to get through those trials. We have to see how those TPPs do in the next few quarters to see,
06:15you know, how bad things could get. Now, we haven't talked about VA, but on the VA side,
06:22we really need some guidance. We really need to get that started. There was legislation passed to
06:28have a partial claim program. Hopefully, implementation of that program will be forthcoming soon,
06:36so that there is an option for VA borrowers, too. Great point. Do you see, like I know in the
06:43last
06:43couple of years, what we've talked about is like, there are people who are in that delinquency,
06:48you know, sequence, they're late, they're whatever, and then they're in law smith, and then they get
06:51out, and then they're back in. Are you seeing those kind of things happen still? Yes, actually,
06:56we track it in our loan monitoring survey. Based on our data for all workouts, so this is conventional
07:02FHA, VA, all together, about 30% of those workouts, those borrowers in the workouts have had a previous
07:12workout already, so they're kind of vulnerable. Not great. I hate to think that they're all just trying
07:18to churn the system, so to speak, but they are more vulnerable and more likely to default again
07:29and seek another workout, and I think that's part of the reason why FHA basically put a halt to the
07:37COVID protocols and said, hey, this is back to business. We have a fiduciary responsibility, so.
07:44That makes total sense. Well, let's talk about foreclosures. What's actually getting all the way
07:48there? Where are we? Yeah, okay, so there's not a bloodbath in foreclosures yet. There was a period of
07:55time where foreclosures were nearly zero. There were no foreclosures happening, and then the headlines
08:01began, oh, foreclosures have doubled and tripled, you know, so we have to be very careful about it.
08:08I mean, foreclosures are sitting at about 0.53% of servicing portfolios is the overall number. Higher
08:16for FHA and VA loans, but that's where we are, and I think the industry average, or the average going
08:25back to 1979. Can you believe it? Our NDS goes back to 1979, but if you look at that trending
08:31from 1979
08:32to the present 2025, it's averaged about 1.36% of portfolios. Okay, so we're still way down. Yeah,
08:40below, over two times higher is what that historical average is. That said, you know, we are seeing
08:46increases, and I think it's really important from the staffing perspective that servicers prepare
08:53for foreclosures because we've been out of foreclosures as an industry for so long. There've
09:00been loss mitigation options. The focus has been on home retention, almost more so than loss mitigation,
09:09perhaps, right? It was about keeping the home, and you know, obviously we still want, servicers want
09:18borrowers to be able to keep their home, but at the same time, there are instances where it just does
09:24not make financial sense. Perhaps the borrower can get some of the equity. They're still in an equity
09:30positive situation, and it could potentially be better for them to leave. So all this to say,
09:40foreclosures are going to go up, and staffing is going to be really important. There were a lot of,
09:47for instance, foreclosure attorneys, Sarah, that just left because there was no business, and so it's
09:53almost like you got to get the band back together. You got to get people trained and have the vendors
09:59in place to either work through a pre-foreclosure, some type of pre-foreclosure sale, or the full
10:10foreclosure. I was just going to say, you know, we know we have shed all these jobs in the industry.
10:15How many of those were like, we don't need you, foreclosure expert? We have zero foreclosures,
10:20you know, and then it's like, ah, what do you do now? I know, I know. Got to bring them
10:26back to the
10:26extent you can, and or use technology to some extent. You know, I think in terms of just overall
10:35staffing could be helped out by technology, artificial intelligence, in terms of understanding all the
10:44program guidance, for instance. I hear that a lot, understanding the regs, the policies for
10:50particular loans, that's really important. So it helps out to some extent, but at the same time,
10:56we're in a service business. It is called the servicing business, you know, and so a lot of it,
11:04each loan has its own unique set of circumstances. Each borrower has their own set of circumstances,
11:12so it's still people driven to a large extent. People driven. Well, pivoting a little bit, okay,
11:20trigger leads, that legislation, the trigger lead ban goes into effect here pretty soon.
11:25That's right. What does that mean to the servicers who are here?
11:29It, it means that they have an opportunity, for sure. And I think a lot of the M&A activity
11:36that you're
11:37hearing about recently, you could say, oh, it's for economies of scale. But I think a lot of it has
11:44to do with recapture and positioning, you know, certain companies are positioning themselves for
11:53that recapture business. So it certainly is an advantage for those that, that service loans and
12:01the numbers are pretty abysmal right now, based on what we're seeing with recapture. We're talking
12:07about a rate of about 20%, meaning one in five borrowers, you know, goes to their servicer for the,
12:16for that new loan. So there's a lot of room for improvement. There are many definitions of recapture,
12:23but based on our data, we're talking about one in five. Well, I've been coming to these conferences for
12:28years, probably a decade now, right? And that recapture rate hasn't really gotten any better.
12:34I mean, it's always like 19, you're like, wow. It did get better, actually. It's, it's,
12:39this is the best it's been since 21. But I fully expect for a full year, and that's only half
12:45year
12:45data. So for full year 2025, when you think about refinancing, it's really picking up in the second
12:51half of the year. I think we're going to see that recapture move up. And again, folks are getting
12:58smarter, there's predictive analytics, there's more data mining, there's just more data available
13:05on borrowers who could potentially be a candidate, you know, for a refinance or a purchase. So I think
13:14we're going to see a lot of movement. Well, and then if you're, if you are not a servicer,
13:19or an originator who doesn't have servicing, then you, you know, it's an opportunity for other people,
13:25maybe it's, you know, you're going to have to step it up. Yeah, the legislation specifically
13:31carves out not only a piece for the servicer, but if you were the original, if you originated the loan,
13:39or if you're a bank, it could be an advantage for banks, if you have an existing relationship
13:45with that particular borrower. So there are other others who could be involved, but it's moving it
13:52from the field of perhaps 20 different organizations down to a handful. Yeah, which
13:58on the consumer side, we would all appreciate that. Yes, we certainly would. We do not want to
14:02hear from 20 lending institutions. You mentioned AI earlier. I mean, it's either like, I was just
14:11talking to someone at lunch, actually, and he was like, it's either like the apocalypse is like Skynet,
14:15or it's like, Oh, no, it's nothing even works. It's not a big deal. Like, where, where, where's the
14:20truth of the AI here? I, I do think it's, it needs guardrails, for sure. But of all the demos
14:31I've seen,
14:32at this conference, we had a whole segment, you know, track, yeah, did dedicated to it. I think it's
14:42real. I think there's, it can be used very, you know, inappropriately. But I, I, I think that there's
14:54a lot of benefit, potentially, to mortgage servicing, in terms of gleaning efficiencies,
15:02especially when it comes to so many different products out there right now, you know, you have,
15:07you have loan products that have a, a down payment assistance program, you know, down payment
15:13attached to it, or, um, heel locks, or arms are moving up, you know, there's more arm share than
15:20there was before. All these different products, construction lending. I, I do think that there are,
15:28there could be the opportunity. It's just, you know, I think it's hard for servicers to know
15:34where exactly to look, you know, where to look and, um, how to best utilize and, and, uh,
15:45utilize AI appropriately so that, uh, you know, there are all sorts of privacy issues associated
15:52with it. But I think at the end of the day, it's, uh, it's just a new frontier. Yeah.
15:59I like the approach you guys took, uh, at this conference to have all those AI labs where it's,
16:03like, very specific. Yeah. Yeah. I just came to an AI lab and let me tell you, I need, I,
16:09I need,
16:10uh, a tutorial in AI 101 because, uh, yeah. Well, if you do, many other people would as well. I
16:17know
16:17that's true. Well, thank you so much, Marina. I appreciate you sitting down as always and walking
16:23us through the, the whole picture. I appreciate that. Oh, thanks, Sarah.
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