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62 Mortgage Holdings, LLC. "Anecdotally, it appears that the tax reform may have slowed down activity at the $1 million-plus level in high- cost/high-tax states. However, it's hard to say exactly how much of the slowdown is due to the tax-law changes versus the lack of inventory and escalating prices and interest rates." Kapfidze said that the clearest 2018 impact from the tax bill was with regard to the increase in interest rates and the sharp contraction in refinance originations. "e higher rates also lower affordability and thus demand, leading to the slowdown in home sales and loss in momentum in home prices," Kapfidze said. "e bill increases the profitability on the bottom line but its negative effects on industry revenues are much greater, and the bill, in sum, has been detrimental in its first year." e past year also brought the word "tariff" back into the mainstream in a way it hadn't been for some time, with President Trump implementing trade tariffs—or threatening to do so—against numerous countries. While tariff saber-rattling continues between the U.S. and countries such as China, some of the already- imposed tariffs have impacted housing to one degree or another. Kevin Brungardt, CEO, RoundPoint Mortgage Servicing Corporation, called the September tariffs "a double whammy on homebuilders" coming on the heels of earlier tariffs imposed on Canadian lumber. "e tariffs on raw goods act as a tax on both the homebuilder and homebuyer, and that has the impact of further driving up home prices and discouraging builders from pursuing entry-level, affordable projects." Brungardt said that, barring any change in policy, these issues should only be exacerbated in 2019, "when the Chinese tariffs (which the National Association of Homebuilders estimate includes at least $10 billion worth of housing- related goods) increase from 20 percent to 25 percent." Brungardt further points out that the industry doesn't just have to worry about the immediate impact of the tariffs but also the potential blowback or retaliation from affected nations. He warned that a trade war could create "further instability at a time when mortgage volumes are down and companies are already facing a challenging road ahead in 2019." Assuming trade tensions do escalate in 2019, Brungardt said to expect an uptick in mergers and acquisitions activity as companies see margins shrink. In May 2018, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act into law, with the bill designed to evolve and streamline regulations put in place by the 2010 Dodd-Frank Act. At the time, Sen. Mike Crapo (R-Idaho), Chairman of the Senate Banking Committee, said in a statement, "is step toward right- sizing regulation will allow local banks and credit unions to focus more on lending, in turn propelling economic growth and creating jobs on Main Street and in our communities." One of the primary changes was increasing the threshold for enhanced regulatory standards from $50 billion to $250 billion, a change designed to exempt some smaller and mid-sized banks from regulations that would still apply to the larger banking entities. e affected regulations pertain to capital and liquidity rules, risk-management standards, and stress- testing requirements, among other things. Unsurprisingly, there was a lot in the bill, but as with the tax bill, some elements of its larger impact on the industry will need to be evaluated from further down the road. During an interview earlier this year, Pam Perdue, EVP, Chief Regulatory Officer, Continuity, told DS News, "ere are still many unanswered questions about how these rollbacks will work in practice." "People have to modify their lending systems. ey've got to modify the compliance-management systems inside their organizations. Whether those are manually done or done with technology, there's a lot of work to do." "If you throw a stone into a pond, the ripples don't occur across the entire pond immediately— they move over time," O'Reilly said. "at's what's happening in the regulatory arena. You have a change in mindset in the context of regulatory enforcement burdens, where the sentiment of the federal government seems to be less aggressive than has been the case under the previous administration. However, that is not translating yet into lesser regulatory costs." "e law's 50-odd mortgage-related provisions are a significant challenge for compliance teams to adjust to," said RoundPoint's Brungardt, "and some estimates show that average compliance costs nearly doubled between Q1 2018 and Q2 2018. We've seen some relief in Q3, and as companies adjust to the new reality, we hope to see some lasting improvement in the regulatory space, which will improve affordability." INNOVATION AND PREPARATION Several of the experts DS News spoke to suggested that this period of relative calm and stability is a perfect time for companies to innovate and prepare for any economic downturns that may eventually arrive. "Over the last few years, we've started to see more and more technologies introduced for home-loan originations, but innovation on the servicing side is still lacking," Rawls said. He told DS News that servicers should work to ensure a better customer experience throughout every step of the homeownership journey. "Homeowners can benefit from more self- service options and greater education to provide them with the information they need when they want it," Rawls continued. "For our industry to be successful, we need to meet customers where they want to be met, whether it's on the web or their mobile device, over the phone, or even face-to- face through a web call." "e biggest changes occurring in the mortgage industry are taking place in the technology space, with scores of new startups and entrepreneurs attacking many long-standing challenges," Brungardt said. at being the case, what will the industry look like a decade down the road, and how should companies be working to build and prepare for that future now? "e customer will be in the driver's seat in a way we've never been before," Brungardt said. "is will mean more transparent access to every step of the mortgage process and a clear understanding of the timeline from application to close." Brungardt anticipates this will mean a significant decrease in how long it takes to originate a loan, possibly shrinking the timeline from weeks or months to days or even hours. Brungardt predicts that the servicing side will also see dramatic improvements and optimizations thanks to advanced analytics and data to better anticipate and assist troubled borrowers in avoiding default or foreclosure. "Lenders/servicers need to be investing in technology now," Brungardt said, "even though budgets are tight, to ensure they are ready for the next upswing in the market cycle." O'Reilly spotlights the GSEs, Fannie Mae and Freddie Mac, as leading examples of how to approach innovation in this era. "e GSEs are doing a great job at increasing their focus on developing tools and solutions that will help improve the customer experience and mitigate risks."

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