The ranks of mortgage bankers gathering in San Diego this week for the annual convention of the Mortgage Bankers Association will be somewhat depleted. Because of the high casualty rate in the industry recently, registrations are down by about 15%.

But a high energy level is expected to more than compensate for the moderate drop in attendance.

Most lenders are arriving in San Diego in good spirits because of their perception that the worst seems to be over in just about every corner of the industry. Volume has improved in the second half for many mortgage banking companies, though loan fundings by most thrifts are flat or down.

Vendors that provide services to the industry have been deluging attendees with advance mailings inviting them to presentations, demonstrations, and just plain socializing over breakfast, lunch, cocktails, dinner, and late-night dessert receptions.

Plenty of weighty issues will be kicked around by featured speakers, by panel members, and in corridor conversations. The agenda is more crowded with weighty political topics than at any other time in the recent past. But other, more mundane concerns are not absent either.

Some of the key topics:

* Will credit scoring be a boon or a curse to the industry?

* Does low-income lending have a future?

* What does the emergence of a splinter group of large lenders mean to the MBA?

* Is the mortgage-interest deduction vulnerable?

* Can conventional lenders find happiness making subprime loans?

* How can midsize and smaller lenders survive as the giants of the industry grab more market share?

* Will the FHA program survive?

Warren Lasko, the MBA's executive vice president, says the future of the FHA program will be one of the major topics. "Rep. Rick Lazio's plan calls for turning FHA into a risk-sharing plan, like VA program," he said. "That's an outrageous and devastating proposal from where we sit."

He said the consequences of Freddie Mac's use of credit scoring will also be much discussed.

"Another hot topic will be Respa," he said. "People will be talking not only about MBA policy but the implications of legislation that is pending."

He said many people were also concerned that proposed legislation would end the Department of Housing and Urban Development's ability to write meaningful rules. "There's a better than 50-50 chance that Congress will act. I hope I'm wrong," he said.

Plenty of other topics will be on the table, including banking reform; the consolidation of the bank and thrift industries and the opportunities it may create for mortgage bankers; disaster insurance; bankruptcy reform; and lender liability under the Superfund law.

Behind the scenes, there should be some lively dialogue between members of the new Mortgage Capitol Group and MBA executives. The group has been formed to seek a seat on the HUD committee that will have to consent to new rules the agency drafts under a bill that is expected to be passed by Congress.

The group, still in the formation stages, is expected to have some 10 major lenders as members. They have become increasingly concerned that their interests have diverged from those of the MBA membership and that the MBA may not be able to represent them effectively on some issues.

Greg Barmore, chief executive of GE Capital Mortgage, is said to have taken much of the initiative in forming the group, but he has been quickly joined by other prominent mortgage executives.

Also behind the scenes, members of the MBA's Freddie Mac liaison committee are expected to confront Freddie over its use of credit scoring to reject loans it has already bought from lenders. Some of the members have complained that Freddie is challenging loans from otherwise qualified low-income and moderate-income borrowers.

That issue, along with delinquency problems on recent low-income loans and a lawsuit against NationsBank Corp., are serving to keep alive the question of how lenders can go about making loans that are both socially responsible and profitable.

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