Joe Murin of JJAM Financial Services on the Future of the Housing Market—and the GSEs

Joe Murin is Chairman of JJAM Financial Services, Pittsburgh, Pa., which he founded in 2014. He previously served as Chairman of Chrysalis Holdings LLC and as CEO of ANC Holdings LP. Before that, he was Vice Chairman of The Collingwood Group and served as President of Ginnie Mae during the Obama Administration.

MBA NEWSLINK: For the first time in years, mortgage bankers and their partners find themselves in a market where the purchase mortgage, rather than refinance, is the primary transaction. How do you think the market will shake out in 2021?

JOE MURIN: I don’t believe we’ll see a complete end to the refinance market this year, but I agree with most that purchase volume will outpace purchase for the first time in years. It seems like we’ve been in a refinance cycle for almost 20 years now and I wonder sometimes if some of the industry’s younger executives can even remember working through a true purchase cycle. I think one of the keys to lender performance this year will be how a business prepares for and executes in a purchase market. That will include solid marketing; improved fall through rates and improved production efficiencies. There’s a lot of opportunity out there. We’ll still see great origination volume in 2021. The difference between the winners and losers in the market will be who embraces the purchase opportunity, and who hides from it (or, worse, ignores it and continues to seek refinance volume).

NEWSLINK: What should mortgage lenders be doing right now to prepare for a changed market in order to succeed in 2021?

MURIN: Industry veterans like myself remember a time when a purchase market was viewed as an opportunity (as opposed to, say, a counter cycle or REO spike). It just meant gearing up your marketing; shoring up your relationships and tightening your costs and efficiencies. That’s just as true today. In fact, I think fewer lenders are truly prepared for this purchase market than one would expect. I wish those well who will be hanging their hats on niche products or continued refinance. In some markets or situation, that may be a great model. But I think it will be the lenders who really prepare to compete in a true purchase market—and execute—who have the best year in 2021.

NEWSLINK: It’s apparent that we are entering a period of increased M&A activity in the mortgage industry. How much consolidation, if any, do you foresee in the coming year?

MURIN: I believe that’s a very natural market response to the historic expansion we saw in 2020 and even 2019. It’s basic economics. We grew to absorb the unnaturally large surge of refinance activity last year. In fact, even then we struggled with our production pipelines. But the rates we saw in 2020 are simply not sustainable. So, it’s a perfectly natural consequence that we’ll see significant consolidation this year. I think the thing to focus on will be who embraces M&A activity at their peak of performance, which will mostly happen early on in the cycle; and who is forced into it as the purchase cycle ramps up. As I said before, not every lender is prepared adequately for a competitive purchase cycle. We may see some of them succumbing to acquisition activity later in the year.

NEWSLINK: Non-QM lending products appear to be making a comeback for 2021. How strongly do you believe that market will be? What kind of role would you anticipate Ginnie Mae or the GSEs to have in supporting that market?

MURIN: This is another natural reaction in the marketplace after an unreal amount of refi volume last year. It’s natural that the participants in the market wish to sustain, or even approach, their origination volumes from last year. That’s going to be nearly impossible, for the most part—there just won’t be as much business. Some of that will be accounted for with M&A; some by competition. But I think it’s only natural that some, or even many, lenders will attempt to grow their markets with a focus on new product. I do think Ginnie and the GSEs will support their efforts, as long as the underwriting standards remain high.

NEWSLINK: Is 2021 the year that the GSEs leave federal conservatorship?

MURIN: I’m not entirely sure there will be any year where the GSEs leave federal conservatorship. There’s still no appetite at the federal level to disconnect itself from a revenue firehose of this size. Additionally, the industry itself, for the most part, still embraces the model. So where’s the impetus to change? Until we see a more robust and feasible RMBS model, I think the inertia for status quo will win out.

NEWSLINK: Mortgage servicing appears to be in the spotlight again, between the CFPB Acting Director’s recent comments about keeping a careful watch over them and the continued monitoring of the forbearance spike that most anticipate will end this spring. Generally speaking, what do you expect mortgage servicers should be anticipating strategically for the coming year?

MURIN: Servicing companies, because of the very nature of their business during a foreclosure/default spike, are easy targets for regulators and politicians.  Unfortunately, default and foreclosure are realities that nobody relishes, but they’re necessary evils. So even when a servicer is doing the right thing at all levels, it’s an easy target. The issue can become way to win easy political points. So it’s going to be imperative that each servicing company run as tight a ship as possible. Brush up on your compliance programs. Be sure there’s training, documentation and sound policy in place. And be able to prove you are not just making policies for compliance but overseeing them and making adjustments as needed.

I also suspect we’ll see some fairly activist rulemaking and/or legislation as the default numbers rise. Servicers will really have to be up to date not only with new or changing federal requirements, but local guidelines as well. And they should probably be prepared to put a lot more time and resources into mitigation or workout-type programs, too.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)