It's January and that means two things: People are working hard on the only month they'll devote to the vast majority of their New Year's resolution-related activities, and people who want others to think they are smart are telling those people what to expect in the year ahead. Since I decided not to start on my resolutions until February, thus cleverly skipping past the most deadly month for those goals, I will use this column to talk about the future, or Mortgage 3.0, at least my version of it.
Instead of writing about what interest rates will do or the crazy rules bureaucrats and regulators will come up with this year, I'd rather focus on four types of mortgage professionals that will come into (or back into) prominence in 2011.
The noncompliance poster child
One truism related to business cycles is that not all players can be on the same part of the wheel at the same time. Our industry will start to enjoy the recovery before borrowers and taxpayers. In fact, that has already started for some, with new profits hitting the books for some players in the third quarter of last year. That's going to cause problems.
The reason we have Dodd-Frank is that taxpayers weren't going to stand for politicians that stood still after the bailout. But the new law is now on the books, and the new rules will be written this year, in a fashion largely invisible to taxpayers. Consequently, when borrowers get angry next year, probably after the first quarter's earnings calls hit the papers or when The New York Times writes about the total number of foreclosures completed in a recent quarter, I expect the government to reach out and slap someone. We saw it happen to BofA with a multibillion-dollar settlement for buyback requests from the government-sponsored enterprises. We'll see more of it next year.
The secondary market prospector
Eventually, executives in our industry are going to tire of complaining about the fact that the only source of liquidity in the market is the federal government, and someone will go out and find some money somewhere else. I'm told that this is already happening in some parts of the business. It will happen more this year. In fact, I suspect that the person who can act like an investment rainmaker will do exceedingly well in 2011.
The technology implementation consultant
I remember a few years ago when a number of consulting firms rose up to help lenders make the most of the mortgage technology available at the time. Some were business consultants who knew some tech guys, others were technology firms that specialized in integrating systems. Some were technology vendors who thought they could make a buck telling lenders why they should buy from them. None of these were very successful.
I think it's because the banks they were selling to were pretty sure of themselves and the technologies they were using. I don't think it is fair to call them arrogant because, as far as I know, their technologies did work pretty well, at least for what they used the tools to do. In any event, there just hasn't been that much of a market for a tech consultant in our space. But that's about to change.
Three trends are likely to intersect and provide an opportunity for a clever tech consultant to thrive in 2011. First, we have smaller and mid-tier institutions originating more mortgages. They have deposits and would like to get the business, but it's not their strong suit and they could use some help. Secondly, we have a fair number of experienced sales managers on the street now that might end up working in some of these banks, increasing the likelihood that they'll get heavier into mortgages and need a more sophisticated solution. Finally, I see more brokers coming back into the business in 2011 and they may be interested in another place to sell their production. I've seen some pretty cool technologies lately that will allow brokers to put their production up for bid by these smaller players, so I expect to see more brokers working with these institutions in the future.
All of this will require technologies and these smaller banks won't have a lot of money to spend on the school of hard knocks, so look for more consultants next year.
The professional mortgage broker
Finally, I expect the long-suffering mortgage broker to re-enter the business this year in a big way. These guys, who are always the first to be kicked to the curb during a downturn, are the real sales professionals who keep the wheel turning around. The big banks may make a big deal out of shuttering their wholesale divisions as soon as things start to get bad, usually blaming brokers for poor quality loans (which just happens to be exactly what they want they wanted to buy when things were good), but eventually they always realize that mortgage lending is a local business and a national lender has a very hard time competing with a really good local mortgage broker. I expect we'll figure out how to compensate these sales pros early this year and by summer, they'll be scaring up business.
Overall, I'm optimistic. I see a great deal of opportunity here. Just because others won't doesn't mean it isn't there. Good luck to all of you in 2011.
Rick Grant is veteran journalist covering mortgage technology and the financial industry.
Follow him on Twitter: @NYRickGrant