Mortgage Cadence’s Joseph Camerieri Discusses the Mortgage Environment Post-Black Knight/ICE Merger

MBA NewsLink interviewed Joseph Camerieri, Executive Vice President and Client Account Management Executive with Mortgage Cadence, Denver, about the mortgage environment after the Black Knight/ICE merger. Camerieri can be reached at joseph.c.camerieri@mortgagecadence.com.

MBA NewsLink: What impact will the Black Knight/ICE merger have on the mortgage industry?

Joseph Camerieri: Everyone has had plenty of time to mull over this impact now that the merger has been approved. I think the industry will be adjusting to a new normal. One impact of this, from my view, will be an acceleration of the overall shrinking of the industry, especially for smaller independent mortgage banks. I have a few reasons for thinking this.

First, post-merger we will have a high double-digit percentage of the industry operating on a tech stack offered by a single owner.

Second, we’re operating in an environment where 80-85% of the industry’s liquidity is coming from three players in the federal government: Fannie Mae, Freddie Mac and Ginnie Mae.

These two points lead into the third result: The only way any lender, especially a smaller independent mortgage banker, will have to differentiate itself will be to pay higher commissions for top loan officers or reduce its margins so it can lower its rates.

That’s a fast race to the bottom and a lot of smaller lenders who have been active participants for the past decade or more are going to be driven out of the business.

Finally, the high cost of the industry’s regulatory framework puts pressure on all players, but that pressure is felt disproportionally by smaller lenders.

We’ll be operating in a “survival of the fittest” environment and that’s not going to be good for many industry players.

MBA NewsLink: What’s it going to take for a lender to emerge as a winner in such an environment?

Camerieri: I think they’re going to need scale. Lenders must have the people and the capital and be willing to invest in technology that will allow them to differentiate themselves.

That means operating more efficiently so they can offer borrowers a better deal without compressing margins and broadening their product menu so they can efficiently serve more borrowers.

I’m not suggesting that just investing in a new platform will allow a lender to suddenly be competitive, but if they can’t operate efficiently and offer a good range of mortgage products with what they are using, doing so could be part of the solution.

The other part is having the courage to look at this business in a new way. Those lenders who continue to think of home finance as a financial transaction instead of a borrower relationship are going to lose out to those who understand how to give this new generation of home buyers what they want.

MBA NewsLink: So, what impact will this merger have on consumers?

Camerieri: I really don’t see any immediate downside risk for consumers, which I think is the reason this merger was approved.

Sure, they’ll have less choice, and many lenders will offer them the same experience, which J.D. Power and others have already pointed out needs improvement, but I don’t think borrowers will be otherwise hurt.

As it is, the real estate community is not underserved by the mortgage industry and there is plenty of mortgage credit available to meet the current demand. We are unlikely to ever shed enough capacity to put consumers at risk of not finding a loan for their next home.

On the other hand, should rates come down next year and all of these 7% mortgages suddenly qualify for rate and term refinances, things might change. But for now, I don’t see a significant consumer impact.

MBA NewsLink: What’s your best advice to lenders now?

Camerieri: They need to start evaluating their current tech stack and if they’re looking for additional functionality, they need to understand that this merger will likely put those requests on hold. Now, if they are already as efficient as they want to be and they are offering all the loan products they want to offer, this may not be a problem.

And they need to be thinking about loan fulfillment. Right now, with volumes low, problems with their process or technology might not come to the attention of management. But as soon as volume ticks up, they will start losing business.

If they’re not already working with a technology partner who can innovate as quickly as their team can, it’s going to hold them back.

The other thing for lenders to consider is minimizing their tech stack to reduce costs. If their LOS can’t already originate everything they want to sell, lenders may want to look at what’s available today. Forward, reverse, HELOC, ARM loans–they are all going to be important if they want to serve the most borrowers and business referral partners. That’s how to win.

(Views expressed in this article do not necessarily reflect policies 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 Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)