Everyone knows that rates have moved higher, especially our brokers. Much higher. Average 30-year fixed-rates are firmly around the 7.5 percent mark (up 3.88% on ayear-to-year basis and the high 2 percent range from a few years ago). Home prices are still relatively high compared to historic norms. The combination of the two impacts affordability, and the demand for new mortgages is waning.

Some potential house buyers and borrowers have stopped either looking at homes or being interested in financing options. But experienced brokers will tell you that’s good news for buyers who figured they didn’t have the requisite credit score or down payment for a mortgage. Surprisingly, while the overall criteria haven't changed, the ability to get approved has become some what easier in recent years. Orion’s management believes that mortgage applicants with modest credit scores are in a better position to compete in this market because there are fewer buyers and there is more room for negotiation.

A study sheds more light on what real estate experts call an expanding U.S. consumer mortgage market. Trans Union’s “Where Will Growth in Mortgage Originations Come From” report, found that “despite an overall decrease in the number of consumers actively seeking a mortgage, some consumer segments remain positioned as potential opportunities for lenders.” Watch for low-income Americans, renters, first-time home buyers, self-employed Americans, and U.S. veterans to increase their prominence for lenders.

Yes, applications are down but brokers know that there are a number of sizeable consumer segments with purchase origination potential for mortgage lenders to work out a deal with eager home buyers. That’s the case even in a period of high inflation and higher interest rates.

Some lenders and investors may be shifting their guidelines within the ATR (ability torepay) requirements. The current economic conditions could encourage stretching underwriting guidelines depending on a lender's risk tolerance, or down payments, income, or credit scores. Orion is a firm believer in the ATR system.

Orion is seeing renewed focus on utilizing DPAs (down payment assistance) programs, or putting clients into credit coaching programs to boost scores. Certainly brokers have more time to assist buyers with working through underwriting conditions and help them through the pre-approval process. And adding personalized value, especially in certain segments of the market, is why brokers can succeed versus internet lending models.