Mortgage Bankers Association chief economist Jay Brinkmann said there will be several factors driving the mortgage business this year in his formal presentation at the group’s National Secondary Market Conference.
First, higher severity costs brought on by the regulatory changes will continue to lower lenders’ acceptable default rates. Thus credit criteria will be tightened further.
As a result, Brinkmann continued, the bulk of lending will be done to fit the qualified mortgage definition or to be insured by the Federal Housing Administration.
The costs of originating a loan will continue to rise. He said those companies which will survive will be the ones which get their costs under control at the same time revenue from gain-on-sale or secondary market transactions decline.
Banks will increasingly weigh the legal and reputational risks involved with mortgage lending against lower origination volume and reduced profits.
Finally, Brinkmann noted that Basel III will likely have an impact on the banking sector’s ability to hold mortgage servicing rights on their balance sheet.
Previously Brinkmann and Michael Fratantoni
