Viewing Into a Crystal Ball for 2003.(for mortgage industry)

It's never too early to start thinking about the future and what better time to discuss next year then now, December, a month in which I suspect mortgage lenders and servicers will be throwing some pretty lavish holiday parties to celebrate the second consecutive year of $2 trillion-plus production.

So, what's ahead for 2003? More of the same? Well, sort of, but there will be some interesting trends to watch. One thing's for certain, unless the economy takes off on a rocket (not likely) mortgage rates will stay in the range of 6% to 6.75%. That's good news for lenders and brokers, but not so good for servicers. Unless unemployment spikes, the housing market will stay robust, just not as robust as the past two years. For the consumer, the choice boils down to this: where do I put my money - in my house or the stock market? Anyway, here's a few general trends to keep an eye on in the new year:

* 80-10-10 Loans: At Mortgage Servicing News and our affiliate publications we do quite a bit of surveying - of both lenders and servicers. Recently we started collecting second lien production data. Home prices surged the past two years and so have second liens - not so much by number of units, but by average loan size. Some firms are making seconds that have average balances north of $50,000. After doing a little digging, our reporters discovered that the 80-10-10 market is booming - I mean, really booming. This is good news for those making the seconds, but not so good news for some of the traditional mortgage insurers.

* 80-10-10 Investors: One of the problems with 80-10-10 loans (an 80% first, a 10% second, and a 10% downpayment) is finding an investor to hold the second. Countrywide, for example, holds some of its seconds, but it's also securitizing the product. As this market continues to grow, the industry could see new entrants that specialize in buying just seconds. (Is Wall Street listening?)

* Subservicing: The servicing market has been smacked upside the head by the refi boom. When was the last time you read a story about a bunch of large "bulk" deals coming to market? I thought so. Midsized firms that still service their own ...