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Executive Summary of Key Trends in the US Residential Mortgage Lending Market

Product Type: Market Research Report
Published by: TowerGroup
Published: June 2000
Product Code: R301-0035
Description
The mortgage industry, globally, is experiencing a period of unparalleled change. New participants are entering all aspects of the business, from point-of-sale to funding, many leveraging the power of technology-enabled e-commerce, and building scale on a multinational dimension. The US residential mortgage market is presently the world's largest residential mortgage market, nearly 50% larger than the second largest market, Europe, and representing over 40% of the global marketplace. The US mortgage secondary market is the only mature secondary mortgage market in the world, with between 55% and 60% of all loans originated in the US delivered into the secondary mortgage market through mortgage or asset-backed securities.

However, to achieve this level of securitization, US lenders have:

  • Adopted standardized products and processes, which have virtually eliminated product innovation.
  • Created a cumbersome and lengthy fulfillment process that ensures the due diligence required by investors and can carry the required "reps and warrants."
  • Created a value chain so long that fundamental change requires the involvement of numerous stakeholders, usually with fundamentally different interests and goals.

    As a result, the US mortgage market has become quite sophisticated and market-leading on the securitization side of the industry. However, the US lags behind many other parts of the globe on the origination side, in changing the business fundamentals and reengineering the process through modern information technology tools. This TowerGroup Research Note examines some of the key trends in the US mortgage origination market. It also takes a high-level view of the increasing use of technology, including how technology is and will be leveraged, as well as the technology-enabled changes to the process that will likely evolve over the next five to seven years. While we do not directly discuss the mortgage servicing business, we do deal with some aspects of servicing as they relate to fundamental changes in the originations process and new product development.

    Table of Contents
    Highlights

    Introduction

    Moving the Market Online

  • Business-to-Consumer: The Early Focus
  • Business-to-Business: The Real Opportunity

    Streamlined Fulfillment: The Industry's Holy Grail

  • The NPV Approach to Risk
  • The Evolution of Straight-Through Processing
  • EPNs--The Electronic Production Network
  • Moving from Loan Level to Pool Level

    New Entrants Survey the Market

  • New Entrants: Lender and Vendor--Eye the Mortgage Frontier
  • Secondary Exchange Markets Evolve--New Products to Follow

    Conclusion

    • Ordering and More Information
    Price and Delivery Options


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