The mortgage originations sector is just seeing the beginning of a recovery in volume and dollars, investment bank ""Berkery Noyes"":http://berkerynoyes.com/Default.aspx believes.[IMAGE]
In a white paper from the firm, managing director John Guzzo wrote that rising home equity, lower excess vacant homes, and more flexible FHA refinance qualifications are all leading the originations sector to ""the beginning of an upward cycle in terms of both volume and dollars.""
Guzzo also cited an increase in the number of mergers and acquisitions (M&A) tracked by Berkery Noyes. Within the banking segment, M&A volume has increased 50 percent on a quarterly basis. The increase ""suggests acquirers and investors are beginning to see a more long-term recovery in the housing and mortgage originations markets,"" Guzzo wrote.
Guzzo specifically pointed to Ocwen's recent acquisition of Homeward Residential Holdings, a sign that Ocwen is looking to expand its origination business while driving more business to its servicing divisions.
M&A activity is also being influenced by changing regulatory framework that pushes mortgage companies to seek technology firms, Guzzo noted.[COLUMN_BREAK]
With the Consumer Financial Protection Bureau (CFPB) authorized to more stringently enforce the Truth in Lending Act, lenders are facing more minimum standards before issuing residential mortgage loans, including those that are deemed to be high cost. They are also tasked with making a ""reasonable and good faith determination"" that the borrower has the ability to repay the loan prior to issuance.
With these requirements, originators are expected to seek more integrated end-to-end offerings from technology vendors in the mortgage sector in order to help ensure compliance.
""Companies that serve the origination sector are well-positioned to benefit from the rebounding real estate market. Likewise, there has been ongoing organic innovation and acquisitions by loan origination software (LOS) businesses, in order to provide a more bundled solution ├â┬ó├óÔÇÜ┬¼├é┬ª At the same time, mortgage originators are looking for tools to shorten processing times, better manage sales leads, and bolster customer retention rates when dealing with repeat homeowners,"" Guzzo wrote.
Stephen Margrett, founder and owner of mortgage technology company ""The Turning Point"":http://www.turningpoint.com/index.html, agreed.
""Driven by increased competition for loan originations and the demands of stringent regulation, we are witnessing an accelerating focus on mortgage marketing at the corporate level,"" Margrett said. ""One consequence is that conventional CRM (customer relationship management) products have been rendered inadequate.""
Those older products are being replaced by automated marketing solutions that create a controlled environment for all players in the marketing process to collaborate, he added.
With home prices and consumer confidence both showing improvement, Berkery Noyes also expects to see growth in the secondary market, including the vendors that serve it.