earlier this year, while it was still in business, Wachovia Bank announced that they, (Wachovia) is exiting the General Bank wholesale mortgage origination channel.
This was a shocking follow up from the announcement from Bank America closing its wholesale division of lending through mortgage brokers.
Look no further than www.ML-Implode.com; Here you can watch the wreckage in the mortgage lending business tallied for the world to see.
Industry guru, Rob Blake wrote asked ... are Mortgage Brokers are an endangered species?
He pointed out that If you listen to Mortgage (broker) Industry insiders you will hear whispers that the 'all-powerful' "banking lobby will finally get the Government to legislate mortgage brokers out of existence."
In his very well written article, he outlines the history of the banking industry's "pursuit of the killing off their competition, many believe the banks decided upon a "scorched earth" plan to rid themselves of retail mortgage competition once and for all. The Plan was one they pulled from the S&L play book a decade earlier".
Blake argues that if the Banks "Give the mortgage brokers just enough rope to hang themselves just like the Savings and Loans did!"
Before, you write this banter off as conspiracy theory hogwash, listen to what has happened and the now dreaded word of the year for 2007. Sub-Prime :
Sub-prime loans, Alt-A loans, option-arm 's , etc.. where originated through private banks; specifically depositor banks to start. (many other private and smaller institutions entered the frenzy to make a quick buck from borrowers who mostly could not afford the loans. Although this is another topic for another day.)
Borrowers did not need to go to their local banks to get a loan. They could get these sub-prime loans through mortgage brokers who could virtually originate a loan to anyone who could sign their name.
Borrowers wanted to buy, they wanted these aggressive loans and the bank underwriters approved the loans. Hey, give the customer what they want, right? and, ultimately the deposit banks where approving these loans.
So, in the vast majority of cases, it's not the honest mortgage broker's fault. It's the banks who approved the risky loans. Right?.. Wrong!
You know who is now getting too much of the blame. -- The mortgage broker.
Currently, their is a vast inspection and audit of the entire industry. Primary focus are new and strict lending guidelines and practices aimed primarily at the mortgage broker.
In fact, not only are the banks not being blamed. They are getting bailed out by the Government.
Think Bear Stearns. Think Fannie Mae. Think Freddie Mac. So on, and so forth , and so on.....
Wow, a deposit bank, JP Morgan/Chase was able to sweep in and buy Bear Stearns . Not only at pennies on the dollar, but with guarantees and assurances and actual insurance from the Federal government. Not bad for Chase Bank, right?
The current and pending Federal Legislation (pushed by the banking lobby) that requires heavy regulation and oversight of mortgage brokers. Mortgage brokers will continue to have less and less product availability. Comparatively to banks, they have unfavorable pricing of rates.
It is not unforeseeable that these factors may ultimately put mortgage brokers out of business!.
Ask yourself, ....why would you go anywhere else but a big bank?
"when the dust settles a few years from now, every one will go to a bank to get a mortgage because that is all that is left.
Often, where there is smoke, there is fire.
I hope he is wrong. However, I am concerned he may be right
Copyright © James Wexler *Will mortgage brokers become extinct?*
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