CHICAGO -- The mortgage lending industry, buffeted by tight credit and skittish homebuyers, is facing an uncertain future as it waits for the economy to sort itself out.
"Our industry -- in fact, the entire real estate finance industry -- is enduring one of the most difficult times in our history," said Warren Lasko, executive vice president of the Mortgage Bankers Association of America.
More than 5,000 members of the group were here last week for the annual convention.
Though the theme of the session was "Shaping Tomorrow," many of those in attendance were thinking more of the past, as outgoing president Ronnie J. Wynn did in comparing the current state of the housing industry to the "darkest days of World War II."
A survey of 40 top mortgage banking firms released Tuesday showed the extent of the troubles. More than half the lenders,
who work across the country, said their mortgage originations declined this September from a year earlier.
Nearly one-third of the firms, which together accounted for $17 ,, billion in loan originations in the last six months, said the drop in business has forced them to lay off employees. Seventeen percent said they even closed branch offices.
The mortgage bankers in the survey were nearly unanimous in their assessment that the fear of a recession, coupled with the
continuing hostilities in the Persian Gulf, is
holding the housing market in check.
Mr. Lasko said Iraq's Aug. 2 invasion of Kuwait scrambled the home buying picture just when it appeared mortgage volume was picking up.
"Instead, homebuyers moved to the sidelines as interest rates moved up and loan applications plummeted. And all of it has been worsened by the budget gridlock in Congress," he said.
Mortgage rates have risen about half a point since the summer and stand at more than 10 1/4 percent on a national average.
David Berson, chief economist with the Federal National Mortgage Association, said that the economic weakness may lower interest rates in the next six months, "but that the relatively small declines should boost housing only moderately."
Against that grim backdrop, Mr. Lasko said mortgage bankers could take only a little solace.
"We're in no worse shape than any other cyclical business. There's no question that there will be a future for mortgage banking," he said.
But Mr. Lasko said mortgage bankers will be faced with a shift in demographics in the 1990s that will make the mortgage market one that must cater to more mature, move-up homebuyers.
On the other hand, originations of government-insured mortgages fromthe Federal Housing Administration and the Veterans Administration, traditional lenders to first-time buyers, are likely to fall, he said, because there will be fewer buyers and because they are likely to become more costly in the wake of the S&L crisis.
A drop off in FHA and VA loans hurts mortgage bankers more than other lenders because mortgage bankers make about 80 percent of all such loans. Those government-insured mortgages make up more than one-third of mortgage bankers'business.
Congressional budget conferees have decided to increase the amount of money FHA borrowers will be required to put down on home purchases and limit the amount of closing costs that can be financed. Those changes, if accepted by both houses, will add about $900 to the typical buyer's upfront cost.
The action on the popular FHA loan program reflects Congress' mood. "The momentum is behind more and more restrictions on anycredit or credit guarantee program," said Jonathan Miller, legislative assistant to Representative John LaFalce, D-N.Y., a member of the House Banking Committee.
That atmosphere bodes ill for consumers, who are likely to face still higher mortgage costs, and for mortgage bankers, who see any increase in fees on mortgage credit programs as even more detrimental to a tough business climate.