MiMutual Predicts Industry Consolidation and Underserved Markets Will Lead 2016 Lender Concerns
Growing national lender sees fair lending as post-TRID industry focus
October 19, 2015 – Southfield, MI – MiMutual, the retail arm of Southfield, Michigan-based mortgage banker Michigan Mutual, Inc. sees 2016 as a year of rapid consolidation for the mortgage industry, as well as a time when underserved markets and minority lending will be the focus of lender and regulator attention.
“2016 could well be the ‘Year of Fair Lending,’ judging from what we have already seen with the Disparate Impact ruling and CFPB’s actions,” said Dr. Rick Roque, managing director of MiMutual. “African American and Hispanic market segments represent a $600+ billion opportunity for lenders, and they will need to address these sectors to both avoid regulatory issues and ensure their own prosperity. But we will have to work through some of the systemic exclusionary practices that are keeping the industry confined to strict QM parameters,” he noted.
Roque also expects a 20 percent decrease in loan volume if the underserved markets are not tapped, which will cause continued industry consolidation, particularly among smaller depositories. “Small to midsize institutions are at risk of being closed or sold, and enforcement actions will drive consolidation from the top down,” said Roque. “Midsize and even larger mortgage banks are candidates for acquisition by aggressive companies interested in replacing the megabanks that have exited the space. I would not be surprised to see 20-30 percent fewer independent mortgage banks on the landscape a year from now,” he predicted.
Nontraditional and minority lending will make the difference, Roque said, and his company has already moved in that direction. “MiMutual is determined to source its production not only from QM and agency loans, but also from diverse ethnic markets, borrowers with lower credit scores, and from first time homebuyers,” he said. The strategy is a recipe for success, but requires change – such as modifying approaches to underwriting loans.
“There are millions of loans that can be made to creditworthy, reliable borrowers who will never miss payments,” said Roque, who earned a doctorate in education with an emphasis on finance and development. In addition to being a mortgage production executive, Roque is intensely interested in improving financial literacy to promote homeownership for Millennials and other markets that are promising but underserved. “In order to open up these markets, the industry has to redefine its current concept of what makes a quality loan,” he said. “It’s not simply about volume. It’s about the future.”
“We are starting with Hispanic borrowers and foreign nationals with thin credit files,” Roque said. “We are also pursuing a more balanced strategy for minority and other borrowers with 580 to 620 credit scores, while requiring full documentation, stable employment track records and down payment capabilities. And finally, we are investing in state bond programs in order to do a better job assisting first time homebuyers and other low down payment candidates in their efforts to move from renting to owning,” he said.
It is not idealism, but pragmatism, according to Dr. Roque. “Volume is important for all mortgage bankers, and we are no exception,” he noted. “But with creativity and effort, both lenders and investors can source untapped volume through market segments that are being shut out by current paradigms. At the same time, it is in the industry’s best interests to help communities of willing and reliable borrowers to develop and grow financially mature through homeownership,” he said. “It is still the American dream, and people will move mountains to achieve it. We intend to help them and ourselves at the same time.”
Founded in 1992 Michigan Mutual, Inc. is a non-bank mortgage lender based in Southfield, Michigan. The company is a major wholesale and correspondent lender nationally, and operates its retail channel as MiMutual. MiMutual is a growing from a super-regional, multistate lender to a significant national retail mortgage banking firm under the leadership of Rick Roque. The company is Freddie Mac, Fannie Mae and Ginnie Mae approved.