SAN FRANCISCO -- As mortgage executives gather here this week for the California League of Savings Institutions' secondary market conference, nobody seems to be in a festive mood.

With interest rates up sharply from last year, people seem determined to glean insights into surviving a depressed loan market and making the most of the public's new appetite for adjustable-rate mortgages.

"People will want to know about new products, about anything that can bring them incremental volume in this marketplace," one attendee said.

Reflecting the tough times in the market, attendance at the conference is expected to be about 10% lower than last year, with 1,200 to 1,300 participants. But that will still make the event one of the largest secondary market conferences of the year.

Adjustable mortgages are sure to be one of the hottest topics. The loans, long the staple of big thrifts, accounted for 36% of all originations in May - a five-year high, according to Federal Housing Finance Board. Consumers gravitate to adjustables when interest rates are higher because of their relatively low initial rates.

For some conference-goers, the big question is how best to sell adjustables into the secondary market; others are looking to buy loans. The willingness of the federally sponsored secondary market agencies to buy adjustables is almost sure to shape up as a lively issue.

As is always the case with this conference, mortgages will be bought and sold in hallways, restaurants, and meetings during the conference, said Kathy Wedeking, senior vice president of the California league.

Sam Lyons, senior vice president at Great Western Financial Corp., Chatsworth, Calif., said he had not planned to attend the conference but probably would spend a day there after all. He said mortgage banks were increasingly eager to talk to thrifts these days about selling them adjustable-rate mortgages.

Keynote addresses will be delivered by Leland Brendsel, chairman of the Federal Home Loan Mortgage Corp., and James Johnson, chairman of the Federal National Mortgage Association.

The two executives are likely to be peppered with questions about their agencies' programs for buying affordable housing loans, observers said.

What Is on the Block?

Another hot topic at the conference: mergers and acquisitions. M&A specialists from the large investment banking firms will be there, and the meeting will be buzzing with names of those looking to buy and be bought, said Ms. Wedeking.

A number of mortgage banking companies have been sold over the past year, often by commercial banks. One of the largest California-based mortgage banks, American Residential Holding Corp., was put on the auction block two weeks ago.

Exactly what kind of outlook attendees bring to the conference depends in part on where they work. Many thrifts, for example, profess to be guardedly optimistic about the new market conditions. But mortgage banks, which generally specialize in fixed-rate loans, have been carrying out massive layoffs.

"If you're talking to someone from Countrywide, they are wondering if there's a pink slip in the mail," said one source.

Cable-Car Capers

* WHAT: Western Secondary Mortgage Market Conference

* WHERE: San Francisco

* WHEN: Today through Friday

* SPONSOR: California League of Savings Institutions

* ATTENDEES: Mortgage bankers and thrift executives

* ACTIVITIES: Between speeches and workshops, mortgage banks will try to find thrifts to buy their production of adjustable-rate loans.

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