From the Common Security Platform and Freddie Mac loan sales to new accounting rules and which direction mortgage rates are headed, there were plenty of important takeaways during last week’s Mortgage Bankers Association’s Secondary Conference in New York. There were more than 2,000 registered attendees with probably another 1,000-plus unregistered attendees circling the streets of New York. To say the least, it was quite a show.

There was no shortage of optimism in the air, but a degree of uncertainty was definitely present among the participants. One of the more notable elevator topics was a future look at what the next White House Administration’s housing policy and goals may look like. Of course that is still a way off, so let’s instead turn our spotlight on to more current issues and concerns overheard at this year’s conference.

9 Takeaways from the MBA’s Secondary Conference:

1. Despite there being a huge originator demand for high-LTV jumbo product offerings, conversations I had with many investors and originators highlight that the actual volume activity seen in this space is minimal (especially in the 95% LTV jumbo category). In fact, one lender recently announced new rules for its jumbo program that include an increase in pricing for all non-delegated correspondents.

2. The mortgage servicing rights for Ginnie Mae (FHA/VA Servicing) liquidity has been a huge concern for mortgage bankers with respect to the co-issue flow market. Some reasons cited are prepay speeds on VA IRRLs and cash flow capacity for many of the nonbanks.

3. Some of the larger and regional money center banks are purposely de-emphasizing government lending. The big news at the conference was the announcement that yet another entity was being targeted by the Department of Justice (DOJ) for originating faulty FHA loans.

4. Most lenders and investors I spoke with were at or over capacity for handling current volumes of business. So no surprise that there is very strong demand for hiring by lenders and vendors alike for sales, sales management, closing management and even heads of mortgage lending.

5. I’m not in the interest rate prediction business so I, like many, look at the MBA’s forecast. It is forecasting mortgage interest rates to stay around 4 percent for the next 12 months. This is not good news for the famous non-QM market segment as it needs higher interest rates to gain meaningful traction.

6. A hot topic for the new and existing correspondent investors alike was trying to identify how big the non-delegated correspondent market really is. One warehouse bank whose entire business model is focused on the broker to emerging banker suggests a range of 5 to 10 percent of the entire nonbank correspondent volume. If you put community banks and regional banks into the mix, the overall percentage is anyone’s guess. One fact is certain:

7. A growing trend among warehouse banks trying to differentiate themselves through their program offerings. A few are now actively offering to their existing customers an extremely competitive prime jumbo and in some cases non-QM product (bank statement, higher than 43% DTI, etc.).

8. Experts feel that other nonbanks will ultimately exit the correspondent investor space. Cash-flow management is becoming ever-so critical for mortgage bankers to continue to grow in the residential mortgage market relative to MSRs, correspondent lending and expansion plans. Each of these activities requires an enormous amount of cash flow.

9. There is a huge push by banks to actively acquire CRA-eligible loans. Many banks will go out of their way to seek lenders who may originate in their census tracts and will get a loan detail (tape) of a lender’s pipeline and pre-scrub these loans for CRA eligibility. Some will pay additional premiums on an individual loan basis beyond the standard loan price. Since more banks are shying away from FHA business, they are hopeful to find these loans within the conforming space today. (For more information on developing a CRA strategy)

Again these are just some of the items overheard at the conference that I found of interest and of value. My role is to work with MGIC account managers and MGIC customers to help track opportunities in the secondary market. So if there is something here you’d like to discuss more, please reach out to your local MGIC account manager.

In the meantime, tell me what you overheard and questions you are hearing out there by leaving a message 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.

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