The Death of an Industry - updated

You wrote:  There has been a virtual abandoment of wholesale for many large lenders and that trend will most likely continue.

My experience is that the lack of wholesale resources is why broker are having such a hard time.  Their wholesale sources are not brokering, except to each other.

Ahh...We are alive and well.  Times are tough right now but there needed to be a "weeding out" as well as additional safeguards put in place.  The wholesale channel is a very profitable origination source if it is managed correctly.  With the MBA placing 2010 originations possibly 40% less than 2009 there will be another shakeout (NMLS will play a part as well).  The bank loan officer can be a very costly employee in a down origination market.  In addition, the non-depository mortgage banking community IMHO is going to have a very interesting 2010.  Fannie/Freddie are sharpening the knives regarding repurchase obligations.  Whether you are are correspondent seller to the money center banks or approved direct with Fannie/Freddie there is a lot of risk involved with the GSE's pushing back loans (and they will be going back many years).  You may not have to repurchase but you will have to fight. Losing Fannie/Freddie seller status is a death knell as is losing your HUD stamp.  Just today Fannie & Freddie announced they are going to be repurchasing loans directly from securitizations for loans 4 payments or more past due.  This supposed 200 Billion dollar deal may be a money saver for the GSE's overall but they will be accelerating the forensic audits and thus the putbacks.  Who knows...it will be an interesting year to say the least.  If I were a 2.5MM+ net worth mortgage banker I'd pull up stakes and take my money to a nice tropical island, sip a cold cocktail and look for the next opportunity ~Doug

Great post on a hot subject for all of us.  Art, I agree completely with your viewpoint here.  I shuttered my mortgage brokerage -- formerly 15 employees, down to 2 as of last fall, and decided to join a Federal Charter.

This move had its pros/cons, but whether I chose "net branch", fed charter, or mortgage banking outfit...the only thing I knew for sure was that for a small, less than 50mm production brokerage the options were dwindling very fast.

Wholesale lenders who I had a great relationship dropped us, many others quit wholesale or shut down, and with new regulatory requirements it was quite obvious where everything is headed.

I agree with Doug as well....if I had 2.5mm net worth, I'd move to the USVI!

Brian

Art: You are spot on. With mortgage loan originations projected to be down as much as you say, say goodbye to the small shop. Failures are projected as high as 50% this year. The net branch model is not immune either. The largest net branch company in America imploded recently. If the branch is broke ( I came from a net branch), it won't help the mother ship. In my mind, large banks or privately held mortgage bankers are all that will be left. Either that or the smaller outfits better be very well capitalized in order to ride out the storm. Up here I expect the carnage to be pretty extreme. My strong company is actively recruiting great loan officers with high integrity. We had a great year last year and should surpass this year. Perhaps there were too many of us. Either way, a weeding out is going on. I expect most of it will be done by the end of this year. Thanks for the post!

I used to like the competition that was in the industry and though there is still some competition, with fewer and fewer mortgage brokers as well as banks I think the fees will start to increase for everyone soon and that isn't good for the consumer.