Mortgage lenders at the industry's annual convention face a wrenching period of consolidation as rising interest rates cut into loan demand.

The number of people working as home lenders could drop from about 30,000 to half or even a third that many, said Christopher J. Sumner, who was elected president of the Mortgage Bankers Association on Monday.

"This business is about as cyclical as any business can be," said Mr. Sumner, who is also the president and chief executive officer of Crossland Mortgage Corp., Salt Lake City. "It looks like we're in an ugly cycle right now that's going to clean out the oversupply that's in our business."

During last year's refinancing boom, industry leaders said the downsizing that occurred in 1994 after an earlier refinancing boom would not be repeated, thanks in part to automation that helped lenders meet demand without as great a buildup in staff.

But "the ugliness is still there," Mr. Sumner said, adding that he still has not found an easy way to reduce staff. He also warned of "suicidal pricing" as lenders compete to make their share of a smaller number of loans.

Mr. Sumner said the shift to lending for home purchases, rather than refinancing, poses a challenge to the technology providers that proliferated during the boom.

Convention attendees would find an exhibit hall filled with "nothing but service groups tied to one technology or another," Mr. Sumner said. But he said the new technology may be irrelevant to today's needs.

"Technology has moved the balance of power to the consumer," Mr. Sumner said, noting that consumers now can shop around for the best price and terms from their personal computers. But he said the market is "not as conducive to taking an application on-line. When it comes to the sale, it's the phone call."

But Mr. Sumner and other MBA officials said lending for home purchases is where the opportunity lies.

Donald E. Lange, whose term as president of the trade group ended Monday, said new affordability goals set by the Department of Housing and Urban Development for Fannie Mae and Freddie Mac -- the two government-sponsored enterprises that buy home loans on the secondary market -- would result in seven million new homes and apartments over the next 10 years and 60,000 new home buyers in 2000 alone.

Mr. Sumner noted that new buyers in underserved markets that the industry is targeting -- Asians, Hispanics, and African-Americans -- "for the most part don't have PCs."

The rise in interest rates is not bad news for everyone in the industry. Mortgage insurers, who tend to lose loans when consumers refinance, enjoy a more stable business in the current environment, noted Darryl W. Thompson, president and chief executive officer of Triad Guaranty Insurance Corp., Winston-Salem, N.C.

The trade group officials said the industry's goal remains to increase the homeownership rate from 67%.

Among the accomplishments for the past year, they said, was the growth of Mers, an industry owned electronic register run by Mortgage Electronic Registration Systems. It currently lists 800,000 mortgage loans. Mr. Lange said the system makes the transfer of mortgage loans simpler and faster.

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