LoanLogics Analyst Warns of Imminent Mortgage Market Volatility.
Trevose, PA | January 30, 2018 "This year is shaping up as a year of volatility for the residential mortgage industry, with originations plunging as interest rates rise in response to $1 trillion reductions in asset purchases by central banks," says industry analyst and blogger Les Parker, CMB, who is senior vice president of industry relations and consulting at LoanLogics
"2018 just may look like 1994 to mortgage bankers," says Parker, referring to the year following the first great mortgage refinance boom, when originations dropped sharply after interest rates rose, prompting many lenders to close or consolidate with stronger partners. “With the anticipated drop in originations and the scramble to keep market share, the resulting margin collapse and liquidity problems will lead to more industry consolidation and insolvencies," Parker forecasts in his MarketLogics newsletter. "Non-depository mortgage bankers lack liquidity; when interest rates move outside of expected ranges, volatility expands and cash demands rise."
"Mortgage servicing rights, already under distress, will discover a lower nadir due to too many sellers and too few buyers," Parker adds. However, he notes, that will eventually provide a buying opportunity for some savvy investors. "Some of the new MSR investors will step up and buy at very good levels," he adds.
But higher interest rates won't be the only problem mortgage companies will face this year, Parker warns. "When volatility expands, the regulatory burdens of Dodd Frank, Basel III and other local, state, federal and international laws and rules will bring about unintended consequences of dislocation and illiquidity," he says.
Parker manages LoanLogics' life of loan analytics and monitoring capabilities and oversees its consulting services. He is also a contributor to the company's strategic planning team and communicates with industry leaders to develop and maintain positive relationships. To subscribe to his MarketLogics newsletter, click here.
About LoanLogics LoanLogics was founded in 2005 to improve the transparency and accuracy of the mortgage process and improve the quality of loans. Its regtech capabilities help residential mortgage lenders, servicers, insurers and investors validate compliance, improve profitability and manage risk during the manufacture, sale and servicing of loan assets. LoanLogics has received multiple awards for its technology innovations, corporate culture, executive leadership and women executives. To learn more, visit www.loanlogics.com
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