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If you've read anything that I have written in the past, you'll know that I haven't been a mortgage broker for over two years now. My old friends are telling me that none of the lenders are lending anymore. WAMU, Bof A, Wachovia (which bought World Savings), Indymac, etc... When I was a mortgage broker, these were the big guys. The ones that were always there.

There were smaller mortgage banks that had more niche products but the big guys were always there and always gonna be there and now they're not.

Just where I live there are three new condo towers. One is completed and the other two are almost finished. How will anyone buy them? Unless they are paying cash (and I know that some are), there is no financing to get. Where is a crafty mortgage broke to go to get a loan for their client. If all the giants have left the building who is left?

The credit crunch and the housing crisis are inexorably tied to one another. They have always had a symbiotic relationship. Well, as I have said before, we cannot exit this recession (possible depression) until the banks are ready to lend again.

This new housing legislation will do little to ease the pain. It really only applies to people who can go "full doc" and those typically aren't the people that are losing their homes (yet). It is the people who bought without having to prove their income that are in trouble. They are the ones who need help and they won't get it. I actually agree that they should not. Why should the responsible people who didn't buy a house because they could not afford it bail out those who did (via taxes)?

So back to the fate of the mortgage broker. My earlier blogs, PART's I & II, illustrated how mortgage brokers were being made obsolete by technology and fierce competition. Now, I see their end because they are losing the very product that they broker. If  the big lenders are no longer selling loans through mortgage brokers, what are mortgage brokers going to sell? That really spells doom for that industry. It may be one of the shortest lived industries in history.

 
Posted by CF Escrow, Inc. on 07/28/2008 01:58 PM   Comments (4)  
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4 Comments on THE END OF THE MORTGAGE BROKER ERA (PART III)

JUL
28
2008
501,798 Points Outside Blog Attended Rain Camp

I had no idea it was that bad for mortgage brokers...they can't go away all together, can they? 
2:12pm • #1

Konnie,

 

I think it is that bad, but I'd like to hear more from active mortgage brokers out there about what they think?
2:37pm • #2

It is tough out there, but the end of mortgage brokerage businesses is not near.  I am an active mortgage broker and have been since 1995.  I am also the President of the Florida Association of Mortgage Brokers.  The current mortgage recession is painful and we are watching a lot of players, both mortgage brokers and wholesale lenders, closing their doors.  The mortgage broker is still by far the least expensive mortgage origination option available.  This slow down has purged many of the profit seekers that entered our industry in 2004 and 2005.  It has unfortunatly also hurt many long time family businesses that simply did not have the reserves to withstand a drawn-out mortgage recession.  In the end we will likely see a return to 2001 levels of competition.  The banks that have left the wholesale industry were not the key players.  The ones mentioned above were big, but not huge in the wholesale industry (regional mostly).  Wells Fargo is the largest and always has been, they are certainly here to stay.  When I first became a mortgage broker there were only a few wholesale banks.  It is my guess that is where we will be again.  These banks will be very selective as to which mortgage brokers they approve to do business with.  In the end, consumers benefit by the increased competition created by a viable mortgage brokerage industry.
Ritch Workman
4:19pm • #3
JUL
29
2008

Ritch,

 

I agree with most of what you said but I have to take issue with your description of WAMU, BofA and Wachovia as not big. You said that they were mostly regional. Well their region was Southern California and this is the biggest region there is. They were huge. Indymac was a monster. Countrywide was the largest. WAMU is massive and so was World Savings. Wells Fargo was No. 2.  I owned a mortgage bank for 10 years and we did very few loans with Wells Fargo. We did allot of business with those others.

Also, I agree that this industry may go back to 2001 levels as far as number of loans originated. I was around then and I think that it may be worse than then though, because there will be far fewer banks funding those loans.Those banks will be selective, but far more borrowers will be using the Internet and only a few brokerages will have the net presence to compete. The banks will work with those brokerages that provide a healthy volume. What about the small guy and the newcomer? The ones who won't yet have a net presence and the volume to get approved. They are in trouble from the start.

In the end, I agree with you that the industry needed a culling, but the end result may not be as good for the consumer or the industry as you think.
1:18pm • #4

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CF Escrow, Inc.

San Diego, CA

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CF Escrow, Inc.

Address: 239 Laurel Street, suite 203, San Diego, CA, 92101

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