Takeaways from the MBA conference

On trends with Fannie Mae & Freddie Mac, Anthony Berris sent, "Fannie and Freddie are becoming the Visa and Master Charge of the mortgage market. They don't actually take much credit risk; they just provide the plumbing and infrastructure for a fee. That's a good business model for them, but the drawback is that it is inherently pro-cyclical. By that I mean when mortgage capital abounds, they will get it out there efficiently. When mortgage capital is scarce, they will do nothing toad substantial new capital to the market. Markets with private capital are always pro-cyclical; hence the old joke that the only time a bank will lend you money is when you don't need it.  Rational market reform would acknowledge the ease with which private capital can be distributed in a good market (because private markets are pro-cyclical) and set up counter-cyclical mechanisms for augmenting private capital when capital is scarce."

Capital is not currently scarce, and Mr. Berris' note went on. "The MBA conference seemed like 2004 to me with lots of 'we're going outside the Fannie/Freddie box' and 'How do you feel about seconds?' in my meetings. The mortgage market is awash with capital and it'll get deployed chasing yield, which means we're going to be seeing the whole slate of alternative products again, bounded, perhaps, by some new regulation like QM. The mortgage bankers were giddy."

While we're on the topic, the dust has now settled on the MBA's conference in San Diego. It's only been three weeks (yes, time flies) and some are heading to the MBA's Independent Mortgage Banker conference in Nashville. In only three weeks! The national conference was certainly a good way to hear the latest views from all industry participants.

Of the SD conference David Wind, who runs mortgage for SoFi, contributes, "The San Diego MBA Conference was well attended by companies looking for the secret formula to attract the Millennials -- the growth market in housing. Much of the focus was on what aspiring home owners want and expect during their home buying experience. At the conference, it was clear that new entrants into the mortgage space have a distinct advantage given their innovative approaches. As one of the newer entrants, the conference reinforced what we've long known to be true: we at SoFi have a great opportunity to rapidly grow market share and get more financially responsible Millennials into homes sooner."

Most admit that there was a positive tone on GSE Rep and Warranty changes. Mel Watt, the head of FHFA, and the CEOs of both Fannie Mae and Freddie Mac spoke about continued improvements to the rep and warranty framework, an updated version of which the GSEs released over a month ago. The new guidelines help provide clarity to lenders on materiality of mortgage origination defects that can result in a repurchase. New rep and warranty guidelines related to GSE servicing will also be released soon in order to provide mortgage banks more clarity in this area. And given the "ruling by enforcement" CFPB environment, clarity is a good thing.