The Mortgage Bankers Association at press time last month had increased its origination forecast by about $100 billion from earlier forecasts to $1.1 trillion in the wake of lower mortgage rates last month that had brought in higher-than-expected refinance volume.
However, at the same time the MBA also lowered its origination forecast for 2012 to $931 billion, citing weaker projected economic growth. This is down by about $30 billion from the MBA's prior estimate, MBA chief economic Jay Brinkmann said in a report last month.
Continuing international and domestic economic concerns exacerbated by one rating agency's decision to downgrade U.S. long-term ratings despite its arrival at an agreement to raise the debt ceiling roiled larger capital markets and was a mixed blessing for the industry last month.
Application volume increased notably for many. As a result, lenders had to contend operationally with the sudden change in volume. In addition, the capital markets volatility tended to be outside many market participants' expectations and risk management plans.
John Walsh, president of Milford, Conn.-based wholesale/retail lender Total Mortgage Services, said in an interview the development adds to the need to have operational strength in today's market, something he has been focused on.
“We are in a significantly better position to handle the spike in volume [than some],” he said, noting that the company has been expanding and “hiring ahead of it.” The company has “a fantastic operations manager.
“I think that is what is going to carry us through,” he said.
For the industry, the key to staying competitive “stems from the operational side of things.”
Walsh said he is a little concerned about some of the new entrants getting small warehouse lines in situations where they may not be well informed about the business' many pitfalls and how to avoid them.
Mortgage banking industry consultant Les Parker told this publication that when faced with market conditions like last month's, one thing market participants can and often do is shift more of their production to best efforts execution rather than mandatory.
(In best efforts, one is not charged a non-delivery fee if the loan does not close, as opposed to mandatory delivery, in which such a fee would be imposed.)
In early August, lenders complained of slowdowns, and in some cases complete crashes of their product and pricing engine technology. Vendors said some investors were updating their data-heavy rate sheets as often as four times a day, a step usually only done once a day. The volatility led loan officers to repeatedly check PPE systems throughout the day to get the updated rate information.
The resulting flood of concurrent users created a perfect storm that crippled the systems, sending vendors scrambling to make software modifications and expand their hardware and bandwidth capabilities.
— Austin Kilgore contributed to this report
