Changes ahead for real estate finance industry

The council is an independent group of 19 real estate finance industry leaders charged with helping MBA and its members to better identify and prepare for change.

According to an MBA news release, among the key forces expected to drive change in the real estate finance industry in the next decade are:

• Consolidation. While the industry will become increasingly consolidated, real estate finance processes will be broken down into a series of smaller component pieces that can be isolated, optimized, automated and outsourced. This tendency to break operational processes and procedures into smaller components will be matched by the increasing disintegration of the cash flows and risks associated with mortgage investments.

• Convergence. The saving grace of the large integrated financial services companies will be the capability to cross-sell a variety of financial products to existing customers, with the mortgage as a key product. Borrowers increasingly will view their mortgages as one of a number of financial products they consume. Investors increasingly will view mortgages as one of a number of fixed-income investments they hold. Because borrowers and investors have access to a growing array of firms and products – and are more willing than ever to choose innovative products and companies that match their needs – the concept of “owning the customer” will be a faulty premise.

• Borrowers. The shifting mix of borrowers will drive change in the real estate finance industry. Changing demographics include patterns of regional migration, an increasing share of borrowers who are recent immigrants and a large cohort of boomers and older seniors. These will change the demand for different types of single-family, multifamily, and commercial properties and, as a result, will change the demand for residential and commercial lending.

“The last four years were record years for this industry,” said MBA Chairwoman Regina Lowrie, in the news release. “However, the only thing we know for certain is that the future holds change in the U.S. and global economies and financial markets.”

Lowrie created the council in fall 2005; it is led by Andy Woodward, former chairman of Bank of America Mortgage and the MBA.

“The Council was given a huge assignment: To identify the major forces and trends shaping the industry; to develop a framework for understanding the impact of these forces and trends; and to provide strategic insights that both the MBA and its members can benefit from,” Woodward said. “The findings are broad and comprehensive.”