Heather Anderson The Mortgage Bankers Association's annual convention was in San Diego this year, so I cruised down the 15 freeway (better known as I-15 to everyone outside of Southern California) to check it out.

It was an impressive show. The MBA spared no expense: The speakers were high profile, the general session stage was well appointed and I received a fancy new, zip-close notepad portfolio with the organization's logo on the cover.

On the revenue side, the exhibit hall was large and, I'm sure to the delight of exhibitors, business appeared to be fairly brisk.

Monday morning's agenda included a Washington session that featured regulator hat trick: HUD Secretary Julian Castro, FHFA Director Mel Watt and CFPB Director Richard Cordray.

None of them announced any new programs, products or regulations. Given the tepid subject matter and the fact that all three agencies posted the speeches online, I was glad I chose to skip that session in favor of a sit-down interview with Ellie Mae CEO Jonathan Corr.

Fannie Mae Tim Maypoulos and Freddie Mac CEO Donald Layton followed with a panel interview that was more informative.

Both men spoke about their organization's goal to increase access to credit and the future of the mortgage market, which Layton said was vastly different from the 1960s, Leave It to Beaver market.

The GSEs' 3% down payment mortgage programs announced last year received positive lip service from both men. Watt discussed the programs too, and noted they are being implemented responsibly and successfully.

That may be true, but as Castro said, median home values have already rebounded to pre-bubble levels. Zillow forecasted 2.2% increase over the next year, which is good news and doesn't sound all that alarming.

However, if we learned anything from the mortgage meltdown, it's that home prices do not always increase. Should the market falter, those 97% loan-to-value borrowers will be underwater. The problem with low down payment programs is they appeal to borrowers that don't have resources to juggle two mortgages if they had to, or handle major unexpected expenses. Those who need them are the most vulnerable when home values fall. Not if, when.

The good news is that the GSEs have significantly shifted their risk to private investors. Maypoulos said Fannie Mae now transfers the majority of its risk in its sweet spot loans – loans with LTV exceeding 60% and aren't HARP refinances – to private investors.

Layton said Freddie Mac redefined its core guarantee businesses to move away from a buy and hold forever strategy. The GSE increased the percentage of non-catastrophic credit risk sold to investors in its single family portfolio from 0% just a few years go to a current rate of between two-thirds and three-quarters, depending upon how it's measured.

That's good news for taxpayers, but passing off risk to private investors doesn't mean the average American won't be affected. Mortgage backed securities in the private market are still on Wall Street, and if those investments aren't held by companies in which people invest in their 401Ks or otherwise, if they fail, they could decrease stock values across the board.

Tuesday's sessions featured some fascinating cybersecurity sessions, and I encourage you to read my coverage of them on our website.

I don't usually turn up for celebrity speakers, but I caught the tail end of a general session that featured Jay Leno interviewing Gen. Colin Powell. The former chairman of the joint chiefs of staff provided fascinating insight into Russian President Vladimir Putin, who enjoys a nearly 90% approval rating. (Or so says the Russian government.) Powell said even though Russia will never achieve the military or economic power the Soviet Union once had, Russians love Putin because he's restored their national pride, and he deserves respect.

Powell also said U.S. foreign threats are serious, but don't threaten our survival as a nation as they once did. The only countries that have the population and economies to threaten the U.S. are China and India. As an ally, India is unlikely to attack America, and Powell said despite concern about China, it won't either.

Think about it, Powell said: China gets money from Wal-Mart and other major U.S. retailers to manufacture products, which it turns around and lends to the U.S. government at a profit. That's a pretty smart business model, Powell joked, and China wouldn't want to jeopardize it.

In response, Leno deadpanned, “So what you're saying, General, is America is too big to fail.”

Touché, Jay.

Instant Insights /

Mortgage Bankers Show Well

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