"Headline Scenarios..Could Get Ugly" MBA Prez
The next president of the Mortgage Bankers Association likens the current situation to surfing. " Bodysurfers call it 'the Wedge.' The vectors behind the Wedge, some manmade and some natural, converge to create an opportunity for either incredible achievement or devastating injury."
"Ladies and gentlemen, welcome to the state of the secondary market in 2005. We have some major vectors interacting to create our own unpredictable waves, and it's all coming to a head right now. It can come crashing down around us, or offer us one of the most beautiful rides we've ever taken. The relationship between originators and secondary market purchasers, between mortgage bankers and the GSEs, is at a critical juncture."
She says everything but 'massive defaults'. "We loan money to people who would not have qualified 30 years ago. That means risk. You know that risk is based on a lot of factors. It's based on the borrower's credit, loan to value and property type. Higher risks are reflected in the rates. Unfortunately, the complex reasons behind the correlations are likely not to be heard. We need to be ready to combat a knee-jerk reaction: calls for more regulation based on the headline scenario."
"We're definitely not in a business as usual year for the secondary markets. Things are going to happen. I can see the waves setting up offshore."