Mortgage executives gathered at New York's Waldorf-Astoria Hotel last week to hobnob, party, and listen to pundits prognosticate about the year ahead.

This year, the three-day senior executives conference of the Mortgage Bankers Association of America was dominated by two themes: the Republican takeover of Congress, which could potentially have a big impact on the mortgage business, and fundamental changes in the mortgage market.

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Salomon Brothers' top Washington lobbyist, Stephen E. Bell, told a dinner audience that a flat-tax proposal, which could replace the current system of a graduated income tax and deductions, may surface next year and may also be an issue in the 1996 presidential race.

A flat tax, which has now been floated by House majority leader Richard Armey, R-Tex., and minority leader Richard Gephardt, D-Mo., would likely lead to the elimination of the deductions for mortgage interest and real estate taxes.

The elimination of the deductions would be heavily opposed by the National Association of Realtors, the National Association of Home Builders, and the MBA.

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Consolidation will continue to be a major dynamic in the home lending industry in 1995, as major players revisit the auction house and smaller companies seek the best means of exit.

That's the message that Brenda White, managing director at Salomon Brothers Inc. and head of its mortgage banking mergers and acquisition effort, brought to the conference.

Without naming names, Ms. White said that "those with a commitment to be in the mega-tier" will eventually come back to the market and make major acquisitions.

Last year, big names like Chase Manhattan Bank, Chemical Bank, and Bank of America were among the institutions buying mortgage banking assets.

For now, according to Ms. White, when it comes to production, there is a widening spread between bids and offering prices.

"Today, a premium on wholesale is not an easy thing to come by. Retail production is still very sought after, though retail is the least profitable side of the business." Healthy demand for servicing is a counterweight to dropping premiums for originations, she said.

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The largest mortgage companies had a relatively small presence at this year's event.

Countrywide, which has reportedly tightened its travel budget, sent no representatives. Nor did Prudential. But some of the mortgage industry's newlyweds were highly visible.

A senior Norwest executive and executives from Directors Mortgage Loan Corp., including the company's chairman, Ray Krebs, were seated at dinner together the first night. Riverside, Calif.-based Directors was recently acquired by Norwest.

Herbert Tasker, former chairman of All Pacific Mortgage, palled around with Inland Mortgage Corp. chief David Fulton as they waited outside a meeting room for Mr. Fulton to moderate a session on international mortgage banking. Inland recently acquired All Pacific.

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