2022 A Look Back
December 31, 2022
If there was one year home buyers and lenders would like to forget, it was this year, 2022.
The year that began on a high note certainly didn’t end that way. We’re looking back at 2022 as a whole, not just the good beginning of the year it had. Overall, 2022 left a wake of destruction to the mortgage industry, the backbone of the U.S. economy. So, while we’ll start off with what went right, the rest of it is all carnage.
What Went Right
No matter the circumstances, people still buy homes. For Bee Mortgage App, this year was a breakout year, our first as a licensed mortgage broker.
2022 highlights include:
- Successful beta test of mobile app
- Record loan origination revenue
- Opened 10 new offices on the East Coast
- Established relationships with top lenders
- Offered lower rates than anyone we've been shopped against to date
- Tested a closing hack allowing us close 1/2 of our loans early
- Featured all over the national media as a new innovative thought leader
- Branded Bee for instant pre-approvals, low rates, and fast closings
- Kicked off our ad channels
Most importantly, we proved our mobile technology works and can fully pre-approve a borrower with verified income and assets in less than 8 1/2 minutes, all within our app, without any loan officer oversight.
Beta testers also raved about how easy the app is to use and compared it to Venmo, Uber, and Netflix by streaming a mortgage directly to their phone.
But it wasn't all easy. The extremely rough period the mortgage and venture market experienced caused us to make some hard decisions about where to allocate resources as we prepared for the worst.
Cause of the Carnage: The Fed’s Monetary Policies
As Seinfeld famously said, “Who wants to be responsible? The first question they always ask when something goes wrong is ‘Who’s responsible?’” To understand what happened, we have to talk about what caused it all, or who was responsible.
With the enemy being “transitory” inflation–that was never transitory to begin with, but very much permanent, economy and currency destroying type of inflation–the Fed implemented a shock and awe monetary policy designed to destroy the enemy’s will to fight. And while it looks like the enemy's will to fight has been weakened, it's still a major threat.
Last seen in the 90’s, this rate hike strategy sent shockwaves through the mortgage market. Having no time to prepare or adequately forecast, many lenders were caught flat-footed as home buyers and revenues disappeared.
The Fed flooded the market with money, cheap credit, and low rates, then reversed course much faster. If 2020 & 2021 was driving a car as fast as it could go, 2022 was slamming on the brakes at 190 MPH as hard as you can.
What happened next to home buyers and the mortgage market was worse than ‘08 (and it's still not over).
2022: A Mortgage Company Graveyard
The list is simply too long to publish, but needless to say, if you didn’t go out of business this year, you can be proud of yourself, no matter how you made it. At Bee, we initially wanted to default ahead this year while others were being set back–what better time to increase ad spend when it’s cheaper and there are fewer companies advertising.
But that turned out to be impossible as we, like others, grossly underestimated the severity of the impact of the Fed’s policies on the housing and venture market. Default alive was the more realistic goal, which thankfully, we [barely] achieved with the help of key partners.
Nearly every mortgage company, and many of their channel partners, either laid off many employees, shuttered entire divisions, cut pay, was acquired for pennies on the dollar, entered into bankruptcy, or went out of business altogether. It was a brutal year, no other way to put it.
One top-20 lender had their term sheet pulled multiple times as their EBITDA crashed this year before being acquired for much less than initially expected. Another mortgage "technology" company that launched in mid 2020, and billed itself as an easy way to refinance online, experienced a 97% decline in revenue. And for an industry do desperate to modernize, standardize and digitize automated workflows and processes, low revenues meant strategic technology investments were put on hold at the very time mortgage companies should be making them. With each market downturn, the entire industry falls further behind. This one set it back even further.
In the venture capital market, funding froze as more term sheets were pulled in 2022 than the past 10 years combined; in addition to intense back-stopping of portfolio companies by institutional and venture capital investors. Fintechs with years of strong revenue performance, a strong balance sheet, and multiple funding rounds were suddenly finding it difficult to raise capital. The easy money good times of 2021 left 2022 with a gnarly hangover that still hasn’t worn off. Many mortgage-tech and prop-tech start-ups that had raised millions and millions of dollars went out of business or into bankruptcy.
Permanent Loan Officer Damage
The unsung hero of the mortgage industry is the legally required role of the mortgage loan originator or loan officer. Many of these people are career professionals who have been in the industry for decades, but what happened this year was unlike any other, by far.
From loan officers taking side jobs delivering pizzas to career loan officers suddenly putting off retirement plans, 2022 is a lot like the town Chris Brander said, “So long, suck town!” to in the greatest Christmas movie ever, Just Friends.
One loan officer retiring at the end of this year just renewed their license for 2023, and another said 2022 was 50% lower than the worst income year they've had in the past 30 years. Many, many, many mortgage professionals were laid off and looking for work for the first time in their career. But the pain didn’t end with the mortgage company employees.
2022 also impacted every vendor for mortgage companies including outsourcing for processing and underwriting, mortgage technology companies offering SaaS, and software engineers. Multiple cuts were made across the board. And while the pain was felt everywhere, it hit home buyers the worst.
Home Buyer Setbacks
At the end of the day, this is all about people wanting to buy homes to build their dreams in. But with every economic event, the cost of homeownership becomes more unaffordable for most people.
The Fed’s unprecedented rate hikes dealt a tremendous blow to homeownership affordability with 55% of Americans saying they cannot afford to buy a home. On the ground, home buyer sentiment has dropped to an all-time low according to Fannie Mae (since they started tracking consumer confidence level).
It seems as if home buyers cannot catch a break as each economic crisis only broadens the gap of homeownership affordability. Over the past 50 years, home prices have jumped 118% while incomes has only increased by 15% over the same period. 2022 only made this worse.
2023: A Look Ahead
While we don’t think next year will be worse than this year (famous last words), we have come to expect the unexpected. We believe next year will be a better housing and mortgage market than this year despite an almost certain major recession. There are still a lot of jobs to fill and few people willing to fill them. If that changes, things could change; and when the data changes, we change our forecast.
No matter who you are or what you do in the mortgage industry, you’ve made it through something really hard. You should be proud. Going forward into greener pastures, you’ve got a lot of knowledge and experience to draw upon to set you up for success in the future. Some of the hardest lessons are ones learned the hard way.
Many that were laid off will get rehired when volume picks back up next year. There are also other opportunities and you have to go where the work is, so keep a good attitude. As one of the greatest wartime leaders, Winston Churchill, famously said about success and failure, success consists of going from failure to failure without losing enthusiasm. Attitude is what counts.
So, looking back on the year: 2022 was hard, if not impossible.
But, just like that, all bad things must come to an end and it’s now over!! Let’s toast to the good things that happened, that we made it through a very hard year and to the beginning of a new one!
Cheers to 2023!
