My takeaway from this week’s conference was the Mortgage Bankers Association is absolutely serious about enacting reform at every level. The words transparency, standards and credibility were used over and over. Because of the massive losses and the government’s long-term commitment to providing financing for homes, the pressure to standardize is greater than ever.
However, the words are not new — people have been saying them for years. The question is: Can they and will they do it?
Believe it or not, the mood at the convention was not all that bad. Remember, the home loan market is still going along at about $40 billion per month. While that number is way down, it still represents a significant volume of loans. Lenders, brokers, little companies and lawyers are all still in business, just not as busy.
The $40 billion number is almost 100% government backed (Fannie, Freddie, FHA, etc). The private market has basically shut down because of a lack of trust in the loans, the rating agencies, the economy, etc. If not for the government intervention, this would have been a different conference, and the liquidity crunch would be affecting a lot more people.
The commercial MBA conference is San Diego in February, and I expect it will be much more depressing. The CMBS market is not supported by the government. So, with the exception of apartment building loans that Fannie and Freddie are doing, volume in commercial is basically $0.
I would call the mood humble but professional. The leadership knows we have issues as an industry, and that we should have done a better job over the past few years. But the attitude was, “We can — and will — do better.”
The folks who attend the industry’s annual trade show are generally professional, honest, hard-working mortgage bankers. The “slime” brokers don’t pay to attend these types of things. There was a kind of “pick yourself up and dust yourself off” attitude, but with an openness to learn some lessons.
The factors for positive change are all there:
1) A humbled market.
2) Government intervention with strings attached.
3) Honest people who want to make things better.
But change is hard, and the forces that stand to lose are powerful.
The mortgage industry need standards more than ever.
Can they do it? Will they do it?
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Jim Flaherty is CEO of CMBS.com and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders, rating agencies and investors.