From housing finance reform to the latest economic projections, here’s a look at the insights from last week’s Mortgage Bankers Association National Secondary Market Conference in New York from a mortgage professional’s point of view. GSE reform, regulatory reform, affordable housing, purchase and refinance market, portfolio lending, and whole loan trading were all topics covered in MBA sessions by leading mortgage industry experts.

There were 1600 registered attendees – lower than prior years, according to my informal poll. Most attendees were cautiously optimistic about lending prospects for the year. I believe many see their pipelines and rate locks growing, and after the “dismal” first quarter for most there is cause to be a little more optimistic these days.

As many of you know, the MBA National Secondary Conference is a great venue for attendees to network and learn about current happenings within the mortgage industry. Here are a few takeaways for mortgage professionals to know:

 

  • Servicing values, which ultimately affect pricing, appear to be firming up.

 

  • April was a volatile month in terms of interest rates.

 

  • There seem to be a few more investors interested in GNMA mortgage servicing rights (MSRs) these days, which is a good for liquidity for those originators/lenders that need to sell this servicing for cash flow, among other reasons.

 

  • Most lender requests were about product niches so they can best compete in a purchase-centric market. Some common themes were for originators to identify investors actively offering attractive jumbos, construction one-time close programs, and non-QM investors that have programs designed with the lender’s need in mind.

 

  • Specialty lending products were common topics, ranging from lower FICO® score FHA loans to renovation programs all the way to reverse mortgages. A few lenders saw their overall volume stay flat last quarter due to the pick-up in reverse mortgage lending business activity.

Non-Qualified Mortgage Investors (Non-QM)

Non-QM investors were very excited about their future growth prospects in the residential mortgage business. A few agency and government lenders suggested that it was the fastest growing segment of their business – one lender even suggested that over one-third of its current volume is non-QM. There were a few non-QM investors already partnering with product eligibility and pricing engines to further simplify this business segment, which can result in more efficiencies and allow even greater participation from both the broker community and correspondent lenders alike.

It’s no surprise that lenders are reaching out and taking notice within the non-QM space. Correspondent investors are trying to survive in a crowded space with shrinking profit margins. Many correspondent investors are now more focused on higher-profit-margin, non-delegated (prior approval by investor), best-efforts delivery business. A growing number of investors are implementing dedicated business development efforts and services, buying loans from correspondents that are financial institutions (credit unions and community banks).

Retail Lenders

We heard some talk of shrinking margins for retail lenders as well as correspondent investors. A few builder-tied mortgage companies suggested that they have seen their capture rates for loans drop as the retail sector has experienced fierce competition due to low inventories in many markets.

Warehouse Banks and Lenders

The secondary market consists of many resilient participants, including the warehouse banks serving all tiers of mortgage banking originators. One warehouse banking executive said, “It’s really hard to be added as a warehouse facility unless there is a significant value proposition that the originator views as very important.”

Warehouse lenders lure new customers and keep existing ones with creative offerings like mortgage servicing financing, jumbo non-QM loans, prime jumbos and scratch-and-dent loans. Some lines of credit offer the old “hospital lines” which allow originators to hold onto loans a little longer than what is typically allowed by the warehouse facility. Others are starting to offer sub-limits for construction lending or “flexibility” in the use of their lines of credit. Perhaps creativity and survival for the coming year are one and the same!

Are you a mortgage professional who attended this year’s MBA National Secondary Market Conference? Share your experience with us in the comments!

Lloyd San, MBA

Lloyd San - MGIC Mortgage Market Manager

A 30-year mortgage industry veteran, Lloyd San currently serves as Mortgage Market Manager for Mortgage Guaranty Insurance Corporation (MGIC). Overseeing a national effort, he’s 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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