A few months ago I wrote a blog titled "The Death of an Industry". To say the least it met with a lot of resistance from the Mortgage Broker community. The Mortgage Brokers of active rain showered me with reasons why I was wrong. They contended that mortgage brokers could shop for the best deal for their customers, but of course the HVCC rules that require the lender to order the appraisal cut the shopping off at the knees. Brokers claimed they could deliver loans at a lower price to the consumer. The new RESPA rules are quickly proving a challenge to that claim! When junk fees become part of the origination cost, it takes much of the advantage from the broker. I have a number of broker friends that are really crying about the new GFE. While many of us welcome the change to hold our competitors accountable, the broker community is crying foul.
Currently mortgage broker market share stands at about 12% vs. a peak of around 69% 4 years ago. Maybe not the death of the industry but it certainly is on life support. In spite of these dismal statistics for the broker industry, there is a ray of hope. The extreme contraction in the industry has weeded out the vast majority of the weak and unprofessional broker shops. Those that remain are the cream of the crop. They are the organizations that approach the mortgage business with professionalism and high integrity. Most of these companies will thrive in some form regardless of their business structure. I think there will be further contraction of the wholesale business model but many of the remaining companies will convert to mortgage banking or the net branch model.
The real threat to the mortgage broker industry is the elimination of the wholsale chanel from the remaining lenders. There has been a virtual abandoment of wholesale for many large lenders and that trend will most likely continue. Combine that with major movement (both from citizen watchdog groups and legislators) against the number two wholesale lender (Provident Funding Associates) and it spells trouble for wholsale supply.
I now believe that a small shell of the broker community will survive but in a sense you could say the days of the old fashioned mortgage broker are already dead!
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