The mortgage industry had a lot to celebrate and a lot to worry about as it convened here at the annual conference of the Mortgage Bankers Association of America.

"Like Sammy Sosa, we've had a record-breaking year," said Paul Reid, executive vice president of the MBA.

Indeed, the association expects total originations to reach a record $1.4 trillion this year. The national homeownership rate is up to 66%. And next year, the MBA's economist said, volume will dip only slightly, to $1.2 trillion.

William Naryka, chief financial officer of Fleet Mortgage Group of Columbia, S.C., said that if mortgage rates average 6.25% next year as he expects, the $1.2 trillion estimate may even be too low.

But in between partying, networking, and patting each other's backs for their collective achievements, mortgage bankers were biting their nails about the fallout from unpredictable interest rate movements and volatile financial markets.

Unexpected prepayments have caused the subprime sector, until recently white hot, to implode. Even for servicers of A-quality loans, the dangers were symbolized by another, less auspicious record set this year: BankAmerica's $250 million writedown on its servicing portfolio.

More than 6,000 people gathered here this week for the association's 85th annual convention, which concludes today. Membership in the organization is at 3,000, another high.

Thanks to technological advancements, the industry has done a better job this year of handling refinancing volume than it did in the 1993 boom, said Donald E. Lange, president of Weyerhauser Financial Investments Inc. and president-elect of the MBA.

The effect of lower interest rates and brisk refinance volume will be "less draconian than in the 1993 boom," Mr. Lange added. "I'm not sure it's quite as bad as we thought.

"A lot of macro hedges are working for the big players," he said, referring to the strategy of maintaining a strong origination business to offset servicing runoff.

Others were less optimistic, saying BankAmerica's accounting adjustment was a harbinger of more servicing hits at other companies.

William R. Starkey, chief executive officer of AccuBanc Mortgage Corp. of Dallas, said BankAmerica's writedown would have "a negative effect for all mortgage bankers."

Banks that provide warehouse credit lines to lenders were "already nervous" before BankAmerica's announcement last week, and are now likely to tighten up, Mr. Starkey said. "Any time a major bank or a mortgage bank announces a major writeoff, it tends to make all banks nervous."

Ultimately, servicing runoffs may prompt more players to leave the industry. "We will see some banks come down the pike in 1999. They're going to bail," said Mark Marple, a vice president at MGIC Investor Services Corp., the investment banking unit of Mortgage Guarantee Insurance Corp. of Milwaukee.

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