How will Americans Generate Wealth in the Future

“Wealth must be produced. It can’t be borrowed or printed.” That simple statement started quite a conversation on my Facebook page earlier today. People know that what the government is doing isn't going to produce wealth in America. Government is a cost center, not a profit center.

So what is the answer? How can we help Americans produce wealth? Homeownership is certainly one way. It's not for everyone. That's a lesson I think we've learned by now. But for many investors, real estate still makes good sense as an investment. We have to make sure that our regulatory system makes it easy for lenders to get money into the hands of these real estate investors and then allows mortgage loan servicers to get it repaid.

Not everyone will agree with me and there are certainly other ways of generating wealth. But with year's worth of real estate inventory either on the market or heading to market, it makes sense to get it back into the hands of people who are willing to develop it in some way.

What are your ideas for how we should be helping American's generate wealth. Speak up now or watch the government continue to thrash the problem around in its own misguided fashion.

Some Acquisition-related Goals

2011 is going to be a very exciting year for Mortgage Cadence. I'm really looking forward to it. Not just because our team is ready to deliver some truly revolutionary technology to an industry that desperately needs it, but also because we're going to be shopping for some other firms to join us in that task.

I recently recorded a podcast that sheds a little light on our acquisition-related goals for the coming year and want to share it with you now.

If anything you hear on this podcast sounds interesting to you, reach out to me. I would love to visit with you about your company and your own goals for 2011. You can leave a comment here, if you wish, or reach out to me on Twitter or via LinkedIn. You can also find me in a number of LinkedIn groups, or by surfing to the contact page on the Mortgage Cadence website. I look forward to connecting with you.

Here is the audio. Program length: about 3 minutes.

A Look into the Future

I think there will be a lot of opportunity in 2011. We’re already seeing that.

We see pockets where it seems housing prices are stabilizing, and folks that understand the mortgage industry, investors, coming back into the space.

I think in 2011 you’re going to see Wall Street getting back into the space, with prime conduit type origination through correspondence; you’re going to see the reverse mortgage industry start recovering.

From an industry perspective I do think there’s a lot of opportunity. That opportunity will be for folks that embrace the new lending paradigm and understand that in this industry it’s not ever going to be the way that it was before.

Find out more about what I see in the year ahead by tuning in to my recent podcast. And then post a comment and let me know what you see coming next.

What's Coming in 2011 for the Mortgage Industry?

I recently had the opportunity to visit with Rick Grant about what I see coming in 2011. I would like to share that with you in this podcast.

While there is still a lot of risk in this environment that we must all take very seriously, I find myself optimistic about the coming year and I'll tell you why in this 10 minute audio recording.

I'd also love to find out what you see coming in the year ahead. You can leave a comment here or reach out to me on Twitter or via LinkedIn. You can also find me in a number of LinkedIn groups. I look forward to connecting with you.

Here is the audio. Program length: 9:30.

Who wants a mortgage these days?

You know what it's going to take to get the mortgage industry back in gear? People who want to buy homes.

I've spoken in this space before about re-building, or earning, trust in our space. That will take a lot of work and it won't be easy. As important as that trust is, desire for homeownership is a prerequisite to getting our industry back on track.

If people feel like they can't qualify for a loan and they don't know what's available and whether they are paying too much or too little, they will simply hesitate and not buy. To me, that's a big concern. If people don't feel like owning a house is meaningful—and we've already seen statistics about a big part of the population that has abandoned their mortgage but will keep up the payments on their cars—if people don't feel like a house is a good long-term investment that's important for their future, we've really got problems.

I saw Doug Duncan speak at the recent Mortgage Bankers Association's annual convention in Atlanta. Doug, who was formerly the chief economist at MBA, has studied the economics of housing for a long time. What he shared with the audience was rather frightening.

According to Duncan, the number of Americans who would be more likely to rent rather than buy their next home if they were going to move increased from 30% in January 2010 to 33% in July 2010. Furthermore, 60% of renters (up by 6 percentage points since January 2010) would be more likely to rent if they were to move, even though 69 percent of renters think it makes more sense to buy a home (they know it makes sense, they just don't believe they can do it!).

Duncan went on to point out that not everyone things buying a home is a safe investment. In fact, during 2010 that number fell 3 more percentage points, that's 16 points below where it was in 2003.

The residential housing market has fueled our economy for years. If that goes away, I don't know if there is a replacement that will impact consumer spending to the same degree. I can't imagine what it could be.

A lot of originators will be spending time, money and effort on rebuilding trust in 2011. Someone better be thinking about how to rekindle the dream of homeownership in the minds of the American consumer or the only thing we'll be able to trust in the near future is the fact that our economy is in trouble.

Where's the collateral

Those of us working in the U.S. Mortgage industry know we've got problems to overcome, but if the testimony of one Linda DiMartini, a supervisor and operational team leader for the litigation management department of BofA Home Loan Servicing, is correct, there may be much bigger problems here than anyone previously thought.

According to DiMartini, it was customary for Countrywide to maintain possession of the original note and the related documents even after the loans were packaged up into bonds and sold off to investors. If this is true, there are a lot of legal problems with this.

Bank of America is denying that DiMartini got her facts right in the New Jersey foreclosure case Bloomberg's Jonathan Weil talks about in the link above. But what if she is right? That would mean that a lot of the collateral behind the mortgage backed securities that powered the mortgage industry and provided liquidity in the days before the crash may simply not exist in a legal sense. I don't think people really understand how big this problem is going to become.

Now I certainly hope this isn't true and that DiMartini has her facts wrong. No one wants to see the country's largest financial institution in trouble. That will not help the economy recover. But if it is true, we must not underestimate the seriousness of this problem.

Ignoring for a moment all of the legal issues raised by Weil and others who have commented on this story, this could have a serious impact on all of us. If the mortgage-backed securities BofA sold investors are, in fact, backed by nothing, BofA could be forced to buy back millions of dollars worth of securities. This will lead to another bailout.

Taxpayers will be on the hook for millions more as the government simply prints out more cash and devalues our currency around the world. The idea that BofA can simply engage in trench warfare and handle this on a case-by-case basis, as some of its executives have suggested, is short-sighted. A pattern of behavior could lead to a class action. Crimes across state lines could lead to charges for more serious financial crimes.

The bad behavior that got us into this mess is not just going to go away. The skeletons in the closet are going to come out and they're going to march and assemble and it's going to be ugly.

Podcast: Confident about the future

Here's another podcast taken from a recent conversation I had with someone in my office.

In this podcast, I'm talking about why I feel optimistic about the future of our industry. This isn't just a gut feeling for me. I see it in our customers' pipelines and in the number of closing packages they are ordering.

There actually is new money coming into the market and it could make for a very different industry in 2011.

Here is the audio. Program length: 2:17.