TheMReport — News and strategies for the evolving mortgage marketplace.
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Feature And for those industry pros who possess these stellar skill sets, opportunity knocks, Glass notes. "Basically, opportunities are still there, especially for those executives who have been able to orchestrate significant change in today's environment, because the demand for that change abounds," he said. Companies Consolidate I nvestment banking insiders agree that corporate consolidation will leap from emerging trend to industry fundamental going forward. In fact, James Gorman, CEO of Morgan Stanley, revealed his theory at a conference recently, asserting that 2013 will bring with it an influx of transactions for banks and other financial lenders. Gorman pointed to the United States' European counterparts, highlighting the fact that many countries such as Canada and France have roughly 20 to 30 good-sized national banks, whereas the U.S. has a staggering 7,000 smaller subsidiaries. Gorman, however, warned that "the economies of regional banks don't add up" and predicted that this country will gradually see the need to choose consolidation and merge its companies accordingly. This consolidation prediction coincides with yet another idea that so-called "big banks" will continue to thrive and hold a power position within the industry, rather than be broken up as some had previously thought. Those in-the-know say that parceling out these firms would do nothing to improve the economy, but would rather be a detriment to the national deficit, as the lending suppliers would be unable to operate and support themselves sufficiently. Common sense even supports this claim, as time after time, the trend for big companies is to want to make transactions with proportionately large lending institutions. While the above hypothesis would seem to make sense, there are those who fear the U.S. banks 28 | The M Report and lenders have already outgrown their capacity and should downsize and disperse to a smaller scale. Such a stance suggests that the coming year will see a shrinkage in large lending firms, simultaneously sending a ripple effect through the ranks of employees—the result being a rise in layoffs and an increase in unemployment rates. However, experts like Glass have another perspective on the matter, pointing out that with all of the consolidations of big corporations, more open doors exist for new blood in the banking world. "Independents are emerging as the new market makers—less constrained with catalyst is that mortgage banks' profits jumped by more than $300 per individual loan throughout the 2012 fiscal year, according to the Mortgage Bankers Association (MBA). Accompany that bright note with an overall gain in the total number of loan applications in both refinancing and first-time purchasing, as well as the statistics showing that total loan production expenses experienced only a slight increase, and the outcome greatly favors the positive for mortgage investors. Glass agreed with this forecast of forward motion, stating that, "Since 2008, the industry has seen a mass exodus, resulting in "It is safe to say that we are now in the midst of a recovery in the housing market." —David Blitzer, Standard & Poor's legacy issues finding opportunities through the maze of regulation and compliance," he said. "These independents are shoring up bank customers, gaining momentum, and helping shape the future of mortgage banking." Although there is opportunity for young upstarts, Glass notes, they must prove themselves—and it won't be easy. "The non-legacy platforms have distinct advantages over their larger conglomerate counterparts but require significant resources to compete," he said. a huge amount of consolidation, as well as an increase in demand across the board in all sectors of the mortgage banking world. We have seen our key clients retooling and capitalizing on these open doors over the last few months and, while conducting national searches in these disciplines, are seeing firsthand just how much opportunity is out there." Investors Drive Opportunity W E xperts in the field cite numerous contributing factors to housing's recovery. One such More Confident Consumers ith the ebb of the economy finally flowing into some steady financial tides, consumer confidence is gaining as long-term interest rates remain at recordbreaking lows and home values rise. Though rates are likely to edge up during the last half of 2013, Freddie Mac believes that rates will still spur consumer spending since the shift will be minimal, with rates staying below 4 percent. Thus, this scenario would maintain a safe and stable environment for both refinancing and originations, promoting accessible lending throughout the 2013 cycle. Home Prices Pop Y et another ray of light in the lending market is the continual recovery of home prices. According to the most recent S&P/ Case-Shiller study, prices have only improved as the months have progressed, most likely due to mortgage rates remaining at unprecedented lows. So impressed by this positive shift is David Blitzer, chairman of the index committee at S&P Dow Jones Indices, who noted, "It is safe to say that we are now in the midst of a recovery in the housing market." Another aspect buoying home prices is the supply and demand factor. Available houses on the market are at the lowest amount in years, and that decrease in inventory—particularly in that of distressed properties—is only furthering the boom in home value as the buyers compete, counter-offer, and scramble to seal the deal. Strength in Sales A lso predicted is an increase in total home sales, which in turn would raise the number of purchase mortgages in 2013. In fact, the MBA revealed recently that it expects an encouraging 16 percent growth in purchase loan originations in 2013 alone. Such good news is a welcome reprieve from the dark and ominous "shadow inventory" fears that loomed last year. In all points, it appears the industry may breathe a collective sigh of relief, as the housing market heals and the economy improves.