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66 I N D U S T R Y I N S I G H T / D R . R I C K R O Q U E Market consolidation in the independent mortgage banking markets has been swift, thanks to several ongoing factors. Among them are the increase in capital requirements for FHA and servicing capabilities, the rapid rise in the cost and complexity of compliance and operations, and the competitive nature of the space that has resisted reductions in loan officer compensation. In fact, loan originator compensation levels have largely been static even as operational costs have grown significantly. Ultimately, these dynamics placed a tremendous amount of pressure on the small to mid-size mortgage bank (those with less than $1 billion in annual originations) to seek outside capital or merge with a larger, better-capitalized mortgage company. Consolidation has been persistent for some time, further evidenced by the fact that more than 50 percent of mortgage originations are now performed by nonbanks, a first since the financial crisis. e one variable that most economists (and most voters, for that matter) didn't anticipate was President Trump, and what effect his administration would have on M&A. Below is a summary of factors that will impact the M&A activity in the mortgage market next year. PROFITS Profitability, and more specifically accretive effects on profitability and market share, will be the driving force while engaging with a prospective acquisition target or opportunity. Discussion points around operating culture and other values will be a distant second. With the new administration, the focus on profits and market share will become more aggressive, especially in light of increased housing demand and inventory shortages in most U.S. markets. DEREGULATION Deregulation has a history of spurring consolidation in the mortgage industry —it occurred both in the 1990s and in the early 2000s, and it's about to happen again. In fact, deregulation is the Republican-controlled administration's top priority. ey're already trying to roll back many of the rules created after the housing crisis, which are considered obstacles to growth. at puts Dodd-Frank squarely in the administration's crosshairs. As far as Trump is concerned, the act puts U.S. financial institutions at a disadvantage in the global market. It's more than likely banks and lenders will see fewer restrictions in the coming year. Already, the President signed an executive order that enables the Treasury Department to restructure parts of Dodd-Frank in ways that will benefit the mortgage industry. As a result, M&A activity will increase substantially as a growth strategy for acquiring firms. Private equity firms have already been increasing investments in mortgage companies such as When will it end? The subject of mortgage mergers and acquisitions (M&A) has been written about extensively since 2010—many articles by yours truly—and at the rate things are going, we're going to see many more.