As the year comes to a close, the mortgage crisis is taking on a different spin. Slowly, yet steadily, banks are closing their wholesale divisions. When this happens, a borrower must go into a bank and deal directly with a bank employee to get a mortgage. He will have no option to use his mortgage broker to get a loan from that lender. THE LENDER ELIMINATED MORTGAGE BROKERS, and more and more lenders are heading in this direction.
When a major player such as Bank of America decides to drop their entire wholesale division, they are sending a message: "See, investors? Now we have gotten rid of the risky part of doing mortgages. We have gotten rid of mortgage brokers."
Expect other banks to follow suit, leaving the future of mortgage brokers questionable. Everywhere, the writing seems to be on the wall, as mortgage companies fall by the wayside, banks close their door to doing business with mortgage brokers, and our legislators attempt to throw some huge hurdles in the path of operating as a mortgage broker.
The truth? Banks could put mortgage brokers out of business overnight. The whole model of mortgage brokers originating loans to send to lenders, could become a thing of the past.
If this seems just too far fetched, think how much the entire landscape of the industry has changed in less than a year. People continue to leave the business in droves, and those that remain? Well, let's just say they aren't having as much fun.
Rather than rant about the unfairness of blaming mortgage brokers for the mortgage crisis (which would be easy enough to do), I would rather ask a more important question: Does eliminating mortgage brokers help or hurt the consumer?
Easy answer: it hurts.
Imagine a world where shopping for the best mortgage means going from bank to bank. Gosh, that sounds like fun...not! That's like eliminating multiple listing and going from real estate office to real estate office to buy a house.
With less competition, do you think consumers will get a better rate, or a worse rate?
Do you think a bank employee will give better service than someone in business for themselves?
Do you think the ability to sell one bank program vs 100 different ones is a benefit to a borrower? How about the ability to mix and match first and second loans?
Do you think borrowers LIKE showing their private information to multiple bankers? Will they like having their credit run over and over?
The thing is, when it comes to mortgage brokers, the banks can have a glass half full, or a glass half empty philosophy. Banks can consider mortgage brokers their best customers (for sending so many loans their way). Banks can consider mortgage brokers their worst enemy (for causing the mortgage crisis...what other scapegoat is there?) But one thing is certain: without lender affiliations, there can be no mortgage brokers, so mortgage brokers are at the mercy of banks.
Okay, you can't have it both ways. With no mortgage brokers, banks have control, but very few loans. With mortgage brokers, banks have more exposure for things going wrong, but far more loans. Which way do they want it? Right now, they want more control
Instead of placing blame and over-reacting, could someone please consider what is best for those who actually need a mortgage, instead of how to fix a crisis that is clearly the result of factors that far transcend the mortgage brokers (who simply sold the loans)?
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