At the recent SourceMedia Mortgage Technology Conference I chaired in Orlando, my opening remarks stressed theimportance of vendor efficiency in keeping lenders afloat during a time of decreased origination fees. Here's whatI said in my opening remarks:
We've all seen the ongoing mortgage meltdown of hundreds of lenders, tens of thousands of layoffs, and many billionsin losses on Wall Street. What's next? Well, in today's National Mortgage News, we are reporting that thewritedown woes probably will be spreading to Fannie and Freddie, with the GSEs taking charges of up to $16 billion.
Okay, we all know the big picture. But what does it mean for mortgage technologists? We've seen a few vendors alreadyclose up their shop, like Arc Mortgage Systems of Texas or Portellus of California. Others are feeling the pinch,especially those that specialized in the subprime market. We reported not too long ago that subprime volume forthe third quarter was just $29 billion, nearly all of it by depositories that can portfolio the product. That'sdown from an average of $165 billion a quarter in 2005. That thriving market of monoline subprime mortgage bankersof 2005 hasn't just been decimated. It's been destroyed. And it won't be coming back soon.
How did this happen? There's enough blame for everybody. It's not just originators who juiced up volumes to makefat loan fees. It's also the lenders who let
| Is there any good news? There is. Here it is: today's mortgage technologists hold the key to lender survival |
underwriting guidelines lapse because they could sell all their production to Wall Street for a fat premium. It'salso the Wall Street houses that, for a second time in a decade, pulled the plug on subprime financing, only tolose billions themselves when they tried to put back loans to companies that had no capital to buy them back. Andhow about the rating agencies who blithely certified all this bad paper, only to have to downgrade tranches bythe thousands this year? And what about regulators and Congress, who let business as usual be business as usualuntil after the horse was out of the barn?Okay, that's the bad news. Is there any good news? There is. Here it is: today's mortgage technologists hold thekey to lender survival in their hands. Our MTC theme this year is "Complex Issues -- Timely Solutions,"and to that I'd like to add a mantra: Now Is the Time.
Now Is the Time for vendors to wring as much cost [as possible] out of originating or servicing a mortgage to helplenders make up for lost market volume.
Now Is the Time for a true end-to-end electronic mortgage that will take the paper out and increase speed to closing.
Now is the Time for new and improved solutions that target the niches where lenders can make money right now! Whetherit's FHA mortgages, loss mit, fraud prevention, reverse mortgages, REO, down time for one area always means boomtime for another area.
Now Is the Time. With mortgage companies downsizing rapidly in the face of decreasing volumes, it might make alot of sense for them to outsource technology instead of keeping their own full departments -- IF the right vendorsolutions are there.
So you can expect to hear about these new strategies, new opportunities, and must things to avoid in today's challengedmarket. But remember how important you folks are. It's probably not exaggerating too much to say that the survivalof the mortgage industry lies in your hands.
