Ellie Mae Chief Sees Bloodletting in '04

The mortgage business is in for a major bloodletting next year if lending volumes fall as expected, according to Sig Anderman, chief executive officer of Ellie Mae.If originations drop by 50%, as some have predicted, companies from the top to the bottom of the lending food chain will have difficulty surviving, he said at Real Estate Connect, a technology conference in San Francisco where he explained how his company allows 40,000 mortgage brokers to interact with service providers. Originations are expected to reach an unprecedented $4 trillion this year, but many forecasters are predicting that production will fall back to about $2 trillion next year. Historically, that's still a very good year, Mr. Anderman said. But with the same number of lenders chasing only half the business, he added, the blood will flow. "It's going to be a painful next 12 months," he said. ".... Everybody in the value chain is going to experience a halving of the market. And with everybody competing for what's left, revenues are going to shrink drastically." Some have suggested that purchase-money volumes will rise next year to offset some of the decline in refinancing activity as mortgage rates continue to climb. But the Ellie Mae officer said it won't be enough, especially if rates reach 7%. "To seasoned veterans, 7% is still a very good rate," he warned. "But for a lot of people, going from 6% to 7% looks like the end of the world."