CHICAGO -- The Mortgage Bankers Association may be staging its biggest party ever as its members convene next week. And the gathering may serve as a metaphor for the course of the industry itself: a joyous binge followed for some by an enormous hangover -- or worse.
Words about the aftermath of the refinancing boom and how to survive it will certainly be on the program as well as on the lips of many attendees.
Registrations are likely to be at least 50% above the 1991 low point of 3.567, and could top the record of 6,171 set in 1987 -- the height of the previous mortgage boom.
A Painful Projection
But some pain may be due.
An association source said the trade group would announce at the conference a projection by its economists that refinancings will fall to about 35% of originations next year, from as high as 70% this year.
Some observers are expecting even steeper declines and saying they will continue in 1995.
Many in the industry fear that such a dizzying decline could trigger a price was a lenders scramble for purchase-mortgage business. Marketing strategies for this new environment are on the formal program.
Calls from the podium for virtue -- in the form of better fair-lending performance -- will be abundant. And announcements of virtuous acts or intentions are likely to be numerous. Angelo R. Mozilo, vice chairman of Countrywide Credit Industries, Pasadena, Calif., is scheduled to announce a new commitment to low-income lending.
And the incoming president, Stephen B. Ashley, will describe a new fair-lending initiative by the association.
Technology will be very much on the program. A number of companies have promised to announce new products or services, including Mortgage Guaranty Insurance Corp., the Federal Home Loan Mortgage Corp., and other suppliers.
Ivan Kaufman, president and chief executive of Arbor Mortgage Corp., Westbury, N.Y., sees the new Real Estate Settlement Practices Act regulations as a major issue for mortgage bankers to grapple with -- and one that is intertwined with technology.
"This issue has been pushed aside because everybody is happy with their volumes," he said. But, he said, the prospect of a decline in mortgage originations lends new urgency to the controversy over the law as lenders seek to cement relationships with real estate brokers, the primary source of purchase business.
The rules being drafted by the Department of Housing and Urban Development, intended to combat kickbacks, would define what kind of fees lenders may pay to brokers.
Mr. Kaufman said he was opposed to referral fees because they simply drive up the costs to consumers. And he also sees barriers to the spread of technology as anticonsumer because they prevent further economies.
He agreed that fire after the refi boom was likely to be a hot topic at the conference.
Concerned About Refinancings
Stanley D. Kirst Jr., executive vice president of BrooksAmerica Mortgage Corp., Santa Ana, Calif., is also concerned about the impact of refinancings. "The topic of greatest interest at the meeting is going to be how [the refinancing wave] is having a detrimental effect on investors," Mr. Kirst said.
He added that the volume of loans being processed was impairing quality control.
"In the long run, the rash of refinancing could backfire as homeowners whose loans were not thoroughly qualified default on their mortgages," he said.
"This is harmful to the integrity of the entire industry."
Warren Lasko, the association's executive vice president, says a nitty-gritty issue that is likely to be discussed in Chicago is the Financial Accounting Standards Board's decision to take up the issue of accounting for servicing rights on originated loans.
The expectation is that the board would change the rule to require that such rights be carried on the books as assets, and amortized accordingly.
"If they pass the rule, it will certainly affect the purchase and sale of servicing rights," Mr. Lasko said.
Some analysts believe the new rule would have a very strong beneficial effect on the reported earnings of mortgage banking companies.
"It would put their reported numbers more in line with their real profitability," said Jonathan Gray, an analyst with Sanford C. Bernstein & Co.
Mr. Lasko also said that issues related to the settlement practices act could heat up soon.
"It seems every day somebody calls me to say yet another company is doing something to guarantee a flow of business from real estate agents," he said.
Just about every mortgage executive has a list of likely casualties if refinancings fall off a cliff. Each thinks his own company will survive, if not prosper. But first they will have to survive the three days of unrelenting hospitality in Chicago.