The federal government dominates the mortgage market -- through direct insurance, guarantees, and purchases. It's tough to compete with them. The only comparable market I can think of is student loans where some companies have found a way to pick off the most credit worthy borrowers (e.g. SoFi). But in student loans the government does no underwriting and offers a uniform rate, some of which are quite high in the current interest rate environment. Whereas in mortgages the government underwrites and offers very low rates.

How exactly anyone expects to make money by lending out money for thirty years at 75 basis points above the risk free rate, with a zero premium call option, levered 4:1 or greater, and with low recovery percentages if the security needs to be seized is beyond me. That's even before getting into the high overhead to deal with servicing and regulatory compliance.

Not sure what you mean by "dominate", but there's $13 trillion in mortgage debt outstanding as of Q4 2014, $5T of that is held by federal agencies, and $4.5T is held by financial institutions [1]. So it's actually a much bigger business than you imagine.

> How exactly anyone expects to make money ... and with low recovery percentages if the security needs to be seized is beyond me

which is probably why you're not a mortgage banker :).

[1] http://www.federalreserve.gov/econresdata/releases/mortoutst...

>which is probably why you're not a mortgage banker :).

If you take a look at just how well mortgage bankers have done over the past 50 years, I'm not convinced they create any value over the course of a cycle for their employers. Indeed they seem especially prone to blowing up said employers every 15 years or so.

Picking up nickels in front of steam roller doesn't seem like a great business model to me. In fact, it looks like a pretty reliable indicator of a principal-agent problem.

I wonder if it would be legal/feasible to underwrite student loans based on major and GPA and how they correlate with loan risk rates.

Yeah, this is the first time I've seen anything about mortgages on HN. It's surprising considering the enormous amount of technical opportunity in the mortgage world right now.

At Blend (https://blendlabs.com/), we're working on a modern mortgage lending platform. For anyone who is interested in this, I'd love to chat!

Although they are significant, they are mind-numbingly boring. Compensation being remotely equal, would you rather work at a techy company like Tesla or Google... or the most boring part of the finance world.

It's like being the amtrack bathroom cleaner. Important, but shitty.