On the Road Again

The mortgage business may be entering a prolonged stagnant period - bad news for those eager to see a corner turned on the disastrous era of the past three years.At the Mortgage Bankers Association's annual convention I attended in San Diego, MBA released its current volume projections, and the trend line is very flat.In fact, each of the years 2010, 2011 and 2012 is projected to come in at about $1.5 trillion in originations.That may not be enough to sustain a robust recovery, although it certainly isn't a terrible amount either.This year, the refi boomlet caused by rate drops should bring originations to somewhere near $2 trillion, so we're talking about a 25% drop from a year of struggle.The implication from this is that the mortgage business is still quite fragile, and likely to remain so for the next several years.The MBA meeting is a good place to learn new things, and I always keep my eye out for numbers.There was a lot of good (or bad, depending on how you look at it) data at an LPS breakfast I attended at MBA annual.Ted Jadlos, senior managing director at LPS Applied Analytics, Jacksonville, Fla., told attendees that LPS data for August showed the second-largest gap between loans improving and loans becoming more delinquent in the last twenty years.That's surely an ominous sign that a lot more bad loans must work their way through the pipeline in the months and years to come. And that doesn't even count loans that have been artificially held up from going through the system due to forbearance and foreclosure moratoria.Mr. Jadlos said the number of loans 180 days past due (or well beyond the point they would usually be foreclosed on) has widened from 40 basis points to 2% just in the course of the first eight months of 2009. That indicates a lot of overhang in the market.And loans that were current at the beginning of the year have been seriously souring as well. Mr. Jadlos said 2.5% of all loans current as of Jan. 1 were now 60 days or more past due. And, severely delinquent roll rates have increased by up to two times normal.In all, Mr. Jadlos said a scary two million loans could fall apart this year.What could prevent this impending avalanche of defaults, with their accompanying deadening effects on home prices and home sales? Not the jobless recovery we've seen to date."Unemployment has to get better before delinquencies do," Mr. Jadlos told the briefing.Mr. Jadlos was optimistic that the new government mods would perform better than the previous industry ones. Those misguided efforts re-defaulted at a 60% clip; Mr. Jadlos thinks the government mods will redefault at half that rate.It's an indicator of just how bad things are in the mortgage market that a 30% redefault rate can be seen as progress!While I was at MBA I also found out that First American CREDCO has expanded its credit reporting with the ENCORE report it announced at the MBA.The new report adds collateral information from First American databases and character information such as ID to its existing tri-merged credit score from the three credit bureaus.John Bauer, executive vice president of business development at Poway, Calif. First American CREDCO, told me the ENCORE package adds up to loan forensics put into one package, merged, and then analyzed by business intelligence.The report will use First American's proprietary nd Merge technology.Bauer said the package has been in development for the past 18 months, and that its genesis came from an idea to tap First American's existing databases to make its credit report more powerful. The firm also wanted to expand its architecture at the same time it expanded the data.The company said ENCORE covers 99% of the nation's population, more than 100 million mortgages and more than 600 million consumer data records.Each report will deliver a summary of consumer and loan factors and also provide a caution alert for anything that may represent risk.Its property module features property characteristics and historical data, including comps and estimated value.The credit component continues to provide information from all three credit bureaus along with other public record information.The identity effort displays key identity information and red flag alerts. ENCORE also verifies income and employment history.Bauer said recent market changes have created a big need for expanded data collection such as this at large banks and GSEs.