Events

New York, NY (May 20-23)
Central concerns for lenders attending MBA’s National Secondary Market Conference & Expo 2018 in New York City included increasing interest rates, falling applications, and smaller margins. With mortgage originations continuing to plunge, many participants were hoping to find the secret to originating loans more efficiently and cost-effectively. The conference represented another productive event for Aspen Grove Solutions.

Originations on the Decline

MBA chief economist Mike Fratantoni warned that originations are trending negatively. He pointed to the latest MBA Mortgage Performance Report, which highlighted the adverse effects that regulation, additional fixed costs, fierce competition, and a move from refinancing to purchase are having on mortgage profits. Fratantoni noted that overcapacity and high expenses led to losses at mortgage banks during the first quarter, for the first time since the same period of 2014, and he also pointed out that many independent mortgage banks are considering abandoning servicing.

Digital Mortgages

Many mortgage originators are pinning their hopes on digital mortgage processes. According to Michael Drayne, senior vice president of issuer and portfolio management, Ginnie Mae will release a plan in June that will address the role of digital mortgages at the agency.

Ginnie Mae securitizes production for the Federal Housing Administration, Veterans Affairs and the U.S. Department of Agriculture Rural Housing Service, and all of these agencies discussed planned technology upgrades designed to help lenders cut costs. To underline the interest in digitization, the final general session at MBA’s National Secondary Market & Expo 2018 was called “Securitizing the Digital Mortgage.”

Non-QM (Qualified Mortgage) Loans

A key aspect of the conference was a marked interest in non-QM (Qualified Mortgage) loans. With market conditions becoming more difficult, it is becoming harder to find easy loans where borrowers meet qualified mortgage standards. This means that the future of the mortgage industry is likely to depend on atypical borrowers, who may not meet conventional lending criteria but are a good risk for the appropriate product. Partly because of this, the non-QM market is forecast to increase by 400% in the next year. Panelists discussed non-conforming loan types, such as bank statement loans and condo loans, although several cautioned against likening non-QM to subprime. They also noted that underwriting non-QM loans can be challenging, especially because they have limited potential for automation.

Conclusion

Attendees left MBA’s National Secondary Market Conference & Expo 2018 with a keen sense of the demands facing them in the lending market. There may be some good news for the industry in relation to the passage of Dodd-Frank reforms that relax the rules restricting thousands of small and medium-sized banks, but the general outlook for mortgage lending is challenging.

The Joule Hotel, Dallas, Texas (May 2, 2018)

The third annual American Mortgage Diversity Council Spring Member Meeting brought together leading executives from across the United States to promote the agenda of diversity and inclusion in the U.S. residential mortgage industry. Aspen Grove Solutions president, Edmond Buckley, participated in a lunchtime session on subcommittee and Affinity Group updates. Key speakers on the day included Dr. Antonio R. Flores, president and CEO of the Hispanic Colleges and Universities (HACU). Dr. Flores is among the 400+ CEOs in the CEO ACTION for Diversity and Inclusion Pledge, the primary CEO-driven business drive to promote diversity and inclusion in the workplace.

The event was organized exclusively for members of the American Mortgage Diversity Council (AMDC), who discussed the most high-profile issues relating to diversity and inclusion that affect the mortgage industry. The council is dedicated to promoting solutions that support a wide variety of diversity initiatives. Issues it faces include supply-chain diversity and the challenges confronting minority, LGBT, and women-owned businesses.

You can see the agenda for this event here.

Detroit, MI (April 15-18)
MBA’s Technology Solutions Conference & Expo 2018 was the year’s leading industry trade show dedicated to the latest technology solutions. Attendees got to network with key mortgage technology experts and vendors, plan for the future, and learn about the latest technologies to help them develop their businesses. This is the essential industry event for anyone who wants to find out about the problems facing all sectors of the industry and the solutions that technology has created to address them.

A panel discussion on the future of the industry included Dominick Marchetti, chief technology officer at loanDepot; Bill Emerson, vice chairman of Rock Holdings; Ben Sizemore, senior vice president of mortgage transformation at Pentagon Federal Credit Union; and Brian Stoffers, global president, debt and structured finance at CBRE. With different scales, scopes, and client bases, these executives’ companies are some of the most successful in the industry. Based on the views put forward during discussions, they see immense potential in their employees and customers. From a servicing perspective, it was generally agreed that technology offers huge opportunities to optimize automation and adopt a more proactive approach to consumers.

New York, NY (March 26-27)
The annual IMN Residential Mortgage Servicing Rights Conference attracted more than 400 participants to New York City, 180 of them from banks, non-bank originators, mortgage investors, hedge funds, and other institutional investors. The IMN forum is the only opportunity on the calendar for owners and administrators of mortgage servicing rights to get together for a dedicated day and a half and discuss nothing but mortgage servicing rights. Given our climate of heightened regulatory scrutiny and low interest rates, it is even more important for the $10 trillion MSR industry to gather and examine the latest developments.

Relax Basel III Capital Restrictions

Executives attending the forum agreed that banks want to see Basel III capital restrictions loosened because it would make holding mortgage servicing rights easier and stop depositories abandoning the servicing business. Flagstar Bank executive vice president and COO, Lee Smith, revealed that federal banking regulators are considering a plan that would boost the percentage of Tier 1 capital that can be based on mortgage servicing rights (MSRs) from 10 percent to 25 percent and ease the pressure on banks to sell MSRs. He pointed out that Flagstar, which has a 10 percent limit, is constantly selling because of the more restrictive capital treatment its retained MSRs could undergo undergo based on current Basel II capital rules. If the limit was changed to 25 percent, he maintained that the bank could be considerably more patient.

Other Shifts in the Market

Predictions for the year also discussed at the conference included a higher profile and liquidity for Ginnie Mae MSRs. Houlihan Lokey‘s managing director of capital markets, Jeffrey Levine, asserted nonetheless that Ginnie MSRs are not an easy asset class.

Stan Middleman, president and CEO of Freedom Mortgage Corp. highlighted the greater likelihood of mortgage rate volatility this year. Because of this, he considers hedging to be particularly important in this stage of the cycle.

Rate volatility is unlikely to deter buying, however, according to Tom Millon, president and CEO of the Capital Markets Cooperative, a subsidiary of Computershare.

Digital Mortgages

Panel discussions revealed that mortgage servicers remain unsure about how to leverage the increasing use of electronic notes and other digital mortgage tools by lenders and the secondary market. New opportunities are emerging for servicers to reconsider both their internal operations and their interactions with borrowers due to the growing use of third-party data sources and automation to make origination processes more efficient.  Simon Moir, senior vice president at vendor eOriginal, pointed out that these opportunities are largely driven by the originators, but that success depends on everybody embracing the digital mortgage, instead of simply following the originators’ lead. He said that e-notes are gathering momentum in housing finance with major players such as Quicken Loans and Fannie Mae promoting the use of digital mortgage technologies.

Fannie Mae’s director of e-mortgage strategy and operations, Shane Hartzler, noted that subservicers are revealing a greater readiness to work with master servicers approved for Fannie’s e-notes. Some servicers and lenders are slow to accept the automation of the closing process and all that comes after it because manual work is still required due to differences in jurisdictions’ rules regarding closings, recordings, and security instruments.

Although a partially automated process is often perceived as being more difficult to maintain than a manual one, Wells Fargo senior vice president Brian Webster revealed that there are few differences between them, and that a partly automated process may offer advantages.