Magazine article American Banker

1994 Shaping Up as Banner Year or a Bummer? Take Your Pick

Magazine article American Banker

1994 Shaping Up as Banner Year or a Bummer? Take Your Pick

Article excerpt

CHICAGO -- As the mortgage banking industry gathered here this week, executives got the word that 1994 would be a bad year for their business. Or maybe a good one.

On the negative side, David Lereah, chief economist for the Mortgage Bankers Association, said he expected loan originations to drop to about $850 billion, from about $1.1 trillion this year.

Refinancings are expected to drop to about $300 billion, from about $570 billion. That would result in the biggest drop ever in total originations and could be very damaging to companies that rely on origination volume for profits.

But Mr. Lereah, speaking Wednesday at the trade group's annual convention, also said originations stemming from home purchases are likely to rise by about 20%, to a record $550 billion. Thus, purchases alone would be larger than total originations in any year before the present refi boom.

And the combination of rising purchase mortgages and declining refis will probably put a halt to the problems many companies have been having with prepayment drains on servicing portfolios.

"It also appears that companies are in better shape to cope with declining volume," said Mr. Lereah. He said staffing has risen by only about 11% a year during the present boom, against 22% a year during the boom of the late 1980s.

Not everybody agrees that the MBA's scenario is a mixture of good and bad news. Walter Klein, chairman of Sears Mortgage Corp., Vernon Hills, Mich. …

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