Higher interest rates and a seasonal shift could result in some empty seats at this year's Mortgage Bankers Association convention in Boston.

With mortgage bankers across the country trying to trim costs to compensate for lower origination volumes, the MBA said it expects about 5,600 to attend, plus some walk-up registrants. About 6,000 people attended last year.

Fixed-rate mortgage originations, the staple of most mortgage bankers, are down, in favor of adjustable-rate mortgages. What's more, refinancing volume is substantially below last year's levels.

"We are certainly entering what looks like another ugly economic cycle, with overcapacity, predatory pricing, and everyone having to deal with all the problems of downsizing," said Christopher J. Sumner, president and chief executive officer of CrossLand Mortgage Corp. of Salt Lake City and the association's new president.

Refinancings, which last year accounted for up to 50% of lenders' business, account for only about 20% now, said Paul S. Reid, executive vice president of the MBA.

Originations are expected to slip to $1.29 trillion this year and $940 billion next year, from $1.5 trillion in 1998. And there was more bad news on rates last week. Freddie Mac said the 30-year fixed-rate mortgage jumped to 7.82%, from 7.70% the week before.

Henry Wilmore, senior economist at Barclays Capital, said he expects to see some "modest declines in both (housing) starts and home sales" in the near term due to higher mortgage rates. "The strength in the labor markets and income growth will offset some of the drag imposed by higher mortgage rates," he added.

Through February 2000, a seasonal decline in volume will put further pressure on the industry because people do not buy homes as actively in the winter months, said Dale Westhoff, senior managing director for mortgage research at Bear, Stearns & Co.

Mr. Westhoff estimated that lenders will suffer a 40% decline in production from August's level.

So where will mortgage bankers turn to stay profitable?

One potential market for bolstering profits will be the A-minus pool of borrowers with slightly impaired credit. Reaching this market entails making loans to underserved populations, including minority group members and immigrants.

Both Fannie Mae and Freddie Mac have turned their attention to the A-minus market and are trying to bring historically subprime segments into the prime market. (See story on page 16.)

Then there is the electronic frontier. Last week Microsoft Corp. licensed Internet lending technology to Chase Manhattan Mortgage Corp., the largest originator and servicer of home loans.

And at the convention, lenders will be faced with an array of offerings from technology suppliers.

"Technology is disrupting and redefining our business," said Mr. Sumner of the MBA. "The Internet is certainly one manifestation of that, but the compression of the food chain of mortgage banking is another, with the margins continually being tightened." he said.

Technology has shifted the balance of power to the consumer, he said. "The customer now wants it faster and cheaper, and we've got to deliver on that basis."

Franklin D. Raines, the chairman and chief executive of Fannie Mae, said his company -- the biggest buyer of mortgages on the secondary market -- will be "compelled to increasingly move our business into using these technologies because our customers will be pushed to move their business into using these technologies." But Mr. Raines said he expects that for some this transition will be "bumpy."

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