In the first and second quarters combined, wholesalers — those companies that derive 75% of their business from the channel — lost 35 basis points on average per origination; in the second quarter alone it was 25 bps, said Marina Walsh, the Mortgage Bankers Association's vice president of industry analysis, during a press briefing at the trade group's annual convention.
"In some of our MBA-Stratmor peer group roundtable data we're seeing bigger losses in broker wholesale versus retail," Walsh said. "There's no sugarcoating it, it's really tough right now in that space."
The losses are driving companies like
That being said, Walsh added that companies that offer a certain product or niche are better off than those whose menu is just the conventional/conforming product.
The MBA's Mortgage Credit Availability Index measures what products investors are willing to purchase in the wholesale channel. A lower credit score product that expands credit availability pushes the index higher. But if companies exit wholesale or investors are not willing to purchase the product, the index moves down, explained Joel Kan, deputy chief economist.
In a declining volume environment, lenders will sometimes broaden their credit bands and the index then rises.
"But now that's being held up by the fact that we're losing investors or lenders on these channels. That's actually pulling the index the other way," Kan said. "We wanted to point that out because that's been very significant in the last few months."
During Sunday's general session, Walsh said expectations are for lenders
Separately, former Federal Reserve Vice Chairman Roger Ferguson believes that while a 150 basis point hike in short-term rates is likely, it will occur over three meetings. Besides the 75 bp rise in November, December will have a 50 bp hike and then another 25 bps early next year.
"I fear that if I'm wrong it is because I've underestimated how much more they have to do," Ferguson said. "At the end of the day, we're likely to see what I hope will be a shorter, shallow recession in the first part of next year."
He said he wouldn't be surprised if the yield on the 10-year Treasury goes as high as 5%. But "the Treasury is going to move down a little bit more quickly than the Fed because obviously the markets are meant to anticipate, and we've already seen some of that."
The Fed was off the mark last year in part because it believed that inflation might have been too low, Ferguson said. The Fed got too caught up in the transitory versus permanent inflation debate, which was why it was late in starting its moves, he added.
