More than 1,500 attendees congregated in New York last week for the Mortgage Bankers Association (MBA) National Secondary Market Conference, representing mortgage bankers, technology firms, mortgage insurance companies, fulfillment services, subservicers, investors and warehouse banks. The busy agenda included presentations about whole loans, the economic outlook and the need for digital mortgages. With so much information being exchanged, it was difficult to narrow down the top 10 takeaways from the Mortgage Bankers Association (MBA) National Secondary Market Conference.

Before I dive into my top 10 takeaways from the MBA Secondary Market conference, I think it’s important to mention the housing market. This year is proving to be challenging in more ways than one. None of us was prepared for how significantly the lack of housing supply and rising mortgage interest rates have impacted the housing market. We also can’t forget about housing affordability combined with continued home price appreciation, also related to lack of housing inventory. The conference buzzed with talk of rising rates, low inventory, little-to-no margin and creative solutions to gain a competitive advantage and perhaps survive the current environment. The expansion of the current credit box is very similar to what went on in yesteryear and is starting to raise concerns from various lenders and investors regarding future performance. This has caused all kinds of issues for lenders and vendors of all sizes.

As many of you know, the MBA National Secondary Conference is a great venue for attendees to network and learn about current mortgage industry happenings. Here are the top 10 takeaways from the Mortgage Bankers Association National Secondary Market Conference for mortgage professionals to know :


  1. Lenders were actively scrambling to differentiate themselves in the market, first with “price wars” and then with product differentiation. Participants mentioned “a race to the bottom” many times throughout the week.


  1. Popular product requests included competitive jumbos, renovation programs, affordable housing/special down payment assistance (DPA) programs and one-time construction-to-permanent programs. Lenders commonly requested product niches to help them best compete in a purchase-centric market.


  1. There were a few lenders that view this year as an opportunity to grow market share by bringing on dislocated production teams and/or companies that shut their doors.


  1. There is universal acceptance that volumes will be off by at least 15% from last year, and some outliers forecast a 20%-or-more decrease in origination volume this year.


  1. Most industry participants continue to feel there is tremendous over-capacity in the business and forecast some attrition with lender closings between now and year-end stabilizing in 2019.


  1. Some even suggest that lender/investor fallout may be brisker after the peak homebuying season as these industry participants wait it out in hopes originations will improve. Merger and acquisition activity is expected to remain brisk in the mortgage business throughout this year.


  1. A few lenders have even addressed their loan officer compensation models to protect their margins for survival. Many of them suggested if lenders don’t adjust LO compensation plans, they could very easily become a casualty in 2018 lender closings.


  1. The non-QM space continues to hire for current and future growth in this sector. Fix-and-flip firms were not far behind.


  1. Digital mortgage discussions were prevalent, but most lenders feel until the major aggregators and warehouse banks participate, there isn’t a sense of urgency from those lenders that sell loans servicing-released.


  1. This should be no surprise to anyone who participates in the residential mortgage servicing market: Rising mortgage interest rates only help the value of mortgage servicing rights (MSR). This certainly helps those mortgage bankers that have servicing to offset the earnings from the current slowdown in originations. Some of these lenders are well positioned to take advantage of firm MSR pricing by having a variety of diverse ways to sell the loans they originate. If they are a current servicer, they can sell direct to the GSEs and then have the option to sell on a co-issue basis. Other options include selling loans on a best-efforts basis or mandatory bulks to the aggregators.

In summary, this was the most cautiously optimistic National Secondary Conference in recent years. Rising rates, low housing inventory and creative, competitive solutions were much of the talk. Like last year’s discussion on warehouse banks, perhaps survival and creativity are one and the same for 2018 for all industry participants.

Did you attend this year’s MBA National Secondary Market Conference? Share your thoughts in the comments below.

Lloyd San

Lloyd San - Retired MGIC Mortgage Market Manager

A 30-year mortgage industry veteran, retired in 2021, Lloyd San served as Mortgage Market Manager for Mortgage Guaranty Insurance Corporation (MGIC). Overseeing a national effort, he was responsible for managing all client-related capital market activities in the areas of bulk and correspondent loan referrals, investor introductions, structured products, whole loan sales, as well as product and personnel introductions.

In addition, he is chairman of the California Mortgage Bankers Association, Secondary Marketing Executive Committee and also serves on the Western Secondary Conference Committee.

A graduate of San Diego State University in California, Lloyd received his MBA in Financial Management from National University. He also holds a California Real Estate Broker’s License.

Tags: , , ,