| Jobs, Volume to Worsen Before Recovery
MBA conference session in Boston October 18, 2007 By NEIL J. MORSE |
| BOSTON — While there have been few winners in the 2007 mortgage crisis, there are plenty of losers — including mortgage employees and subprime originators. At a scantly attended mortgage banking conference this week, predictions of a quick recovery were absent, though some are still making their way in the new environment.
Despite uncertainty about its origin, the phrase, “Everything old is new again,” seems to apply to the current contraction of the U.S. mortgage market. Those in the business more than six years will recall origination volume under $2 trillion for the year 2000 — more than the $1.9 trillion the Mortgage Bankers Association now expects for 2008. The projection is a stunning drop of 50 percent from the peak year of 2003. MBA’s Chief Economist Doug Duncan reported to attendees at this year’s annual convention in Boston this week that volume will come in at $2.3 trillion this year before dipping further next year. “This is a deep housing recession,” Duncan said somberly. Not only will prime mortgages slide, but Duncan predicted that subprime production next year would be only one-third of its $600 billion mark this year and even a smaller percentage from its peak, earlier in the decade. Mortgage-related job losses, too, will total as many as 110,000, lowering aggregate totals from a high of a half-million to below 400,000. And if attendance at the convention was any indication, the number could be even lower. One wag quipped that the noticeably quiet convention had become “the industry’s biggest job fair.” As to when a recovery might be forthcoming, predictions ranged from one to five years, generating intense discussion during a general session populated by industry leaders from the government-sponsored enterprises and private sector. “A market recovery is not happening tomorrow,” said Patricia Cook, executive vice-president and chief business officer, Freddie Mac, McLean Va. “It probably won’t occur until at least June 2008,” she said. Less optimistic was Thomas Lund, EVP, single-family mortgage business, Fannie Mae, Washington, D.C., who said: “We’re a long way from a healthy recovery.” And, Paul “Buck” Bibb, CEO, National City Mortgage Co., Cleveland, Ohio, said: “I think we’re looking at early 2010 for a reasonable recovery.” Most pessimistic in his prediction was David Lowman, CEO, Global Mortgage, Chase, Iselin, N.J., who put recovery at “maybe 2010.” Lowman said the current housing crisis occurred “because we got away from basics.” He cited a report on the last housing market downturn that measured the time between the previous peak and the next high. “It was eight years and two months,” Lowman reported, which would put the next market peak somewhere around 2011, with a slow ascension to that point beginning two years from now. These leaders agreed that federally insured mortgages issued under the aegis of the FHA, would be one bright spot in the coming years, but lenders may not be ready to take advantage of this opportunity. Bibb said FHA is not for everyone, noting that National City must “re-educate a whole generation of new salespeople to the current environment.” Indeed, he joked darkly: “Many loan officers who joined us in the last few years who can’t spell F H A.” Processing and underwriting staffs, he said, “have to learn how to differentiate between a good loan and a saleable one.” GSE leaders could not be blamed for feeling just a bit smug about the turn of events, which has returned conforming lending to center stage. Fannie and Freddie are attempting to “bring stability and trust back to the mortgage market,” according to Patricia Parsons, Fannie’s director of product development, speaking last month at a regional conference. Freddie’s Becky Froass, senior director, industry and state relations, said confidently that “Freddie benefited from this year’s mortgage industry crisis, demonstrating the value of its GSE model.” |
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