Christopher Dunn – Standards emerged

In the 1970s, many consumers had never heard of being charged points on a mortgage. Today, most ads treat points as common knowledge. As the mortgage industry has evolved, one of its local professional trade groups also has matured.

In the 25 years since its birth, the Massachusetts Mortgage Bankers Association has grown into a well-grounded organization that helps its members weather the cyclical and sometimes stormy world of the mortgage banking industry.

According to its Articles of Incorporation, 11 men met on March 11, 1976 for the first meeting of the MMBA. The purpose of the newly formed association was “to promote the welfare of the mortgage banking system of the commonwealth of Massachusetts and to improve its service to the community.”

The companies employing those first organizers reads like names carved into the granite tombstones of a graveyard: Boston Five Cents Savings Bank, Malmart Mortgage Co. and the Woburn 5¢ Savings Bank, to name a few. The first president – a designation which was changed to chairman of the board of directors in 1994 – was Peter J. Blampied of the Boston Five.

From the start, it was clear the founders intended the association would educate its members, as just three months later it held its first seminar titled “How to Lend Legally.”

It was a fitting topic as the industry was undergoing vast change. Chris Dunn, who runs the residential lending department and is a senior vice president at the $1.7 billion-asset Rockland Trust, said the nature of the business now is significantly different than it was during those early days. Although he was not one of the founding members, he worked for Blampied at the time and went on to become chairman in 1988 and 1989.

Mortgage banking in the sense of originating loans for sale on the secondary market wasn’t practiced much in the Bay State, he said.

“That all changed in 1974 when the savings banks, the primary residential lenders here, experienced a lot of deposit outflows. I know the bank I worked for at the time, the Boston Five Cents Savings Bank, the Charlestown Savings Bank and people like that, began to turn to the secondary market and started selling loans to Fannie Mae and Freddie Mac,” said Dunn.

Since then, the trend has leaned toward the mortgage banking business rather than just portfolio lending.

“Clearly that whole change is basically what brought about the Mass. Mortgage Bankers,” he said.

‘Good’ Changes
At its first annual meeting on Oct. 5, 1976, at the Copley Plaza Hotel, the group already had 80 members. During that first year, it easily met its membership goal of 100 members, according to the minutes of a January 1977 meeting. At this year’s annual meeting, 400 people attended. In 1998, at the height of the latest refinancing and economic cycle, 2,000 people attended the group’s annual convention in Newport, R.I. According to Susan Zuber, current president of the MMBA, membership numbers have declined slightly to about 275, but that is to be expected as the economic downturn shakes out those members who entered the market for a quick turnaround during the refinance boom and mergers continue to consolidate players.

As banks and mortgage bankers associated more with Fannie and Freddie, the secondary market began setting the standard, said Dunn. “As soon as that began to occur, and that was the move towards standard documentation … title insurance, as those things began to become the standard, the playing field opened up to others.”

From there, the industry has simply accelerated, especially as new technologies emerge. Twenty-five years ago, everything was done with paper and pencil, said Peter Milewski, director of the Mortgage Insurance Fund at MassHousing and chairman of the MMBA in 1990 and 1991. “Decisions were made by boards of investment of banks. It’s funny if you look at the comparisons. Not that long ago, we took applications from borrowers in hour-long interviews,” he said. Today, applications are taken via the Internet or typed right into the hand-held or laptop computer of the originator. Underwriters used to spend hours analyzing a loan file while today, data is entered through Loan Prospector or Desktop Underwriter software and the decision comes within minutes, he said.

Technology has helped pare down much of the cost of doing business and the legwork and time involved in cultivating multigenerational relationships to ensure continued business, said Milewski. “Today we data mine … We’ve commoditized the mortgage process in a way very similar to day trading.”

The blossoming of the mortgage banking and brokering industry has benefited the community as well, said Milewski.

In 1975, there weren’t many codified rules and the majority of the process was determined by mortgage officers and bank presidents. Very few mortgage bankers and brokers existed. “The process favored white, middle-class borrowers. There was an irrational, well-intentioned bias against women and minorities and inner-city neighborhoods and properties,” he said. But the disintermediation of the 1970s and 1980s resulted in more banks seeking approval to sell loans to Freddie and Fannie and doing business with housing finance agencies.

“I think regulations and laws such as the Equal Credit Opportunity Act and the Community Reinvestment Act, the Home Mortgage Disclosure Act and the Fair Lending Practices Act all changed the way lenders look at borrowers and properties. Those changes have been good. They’ve been very, very long-lasting,” Milewski said.

But Sushil K. Tuli, chairman and chief executive officer of Leader Mortgage in Arlington, said that over the course of his 15-year career in the mortgage lending industry he never heard of someone saying explicitly they didn’t want to lend in a certain area. Tuli, who served as chairman of the MMBA in 1999, said some companies, like his, marketed themselves to immigrants and minorities from the start.

First-time homebuyers are benefiting from changes within the industry. Milewski said that 25 years ago “you’d be lucky to find a bank willing to do a 90 percent loan, let alone a 95 or 97 percent loan. You had to put probably 20 or 25 percent down to buy a two-, three- or four-bedroom home.”

The MMBA has reflected the changes in the industry. When it first began, it was dominated by banks such as the defunct Shawmut and only a few mortgage bankers like Commonwealth Mortgage.

“Today the association is much more diverse. There are large banks, small banks, a lot more mortgage bankers and certainly a lot more mortgage brokers,” Tuli said.

Tuli said the association is really a benefit to its members in three areas: education, networking and supplying information and conducting initiatives revolving around regulations and laws.

Since its first year of operation, the MMBA has made itself heard on Beacon Hill. The association takes stands which aren’t always popular, such as its opposition to a bill that would expand CRA to mortgage companies and brokers.

While some consumer groups say it still exists, there has been an intense regulatory and public information campaign to eliminate predatory lending in the state.

“The industry has not been without its blemishes and mini-scandals. But relatively speaking, there has been a good cooperative relationship between Mass. lenders and mortgage bankers and legislators and regulators,” said Milewski.