As someone who has seen a number of economic ups and downs over the past few years, this downturn is the worst I've seen. It continues the rise of government regulations and fees. The state of North Carolina has now enacted additional regulations on mortgage brokers and I predict it will be the straw that breaks the camels back.
Starting on October 1st 2008
Yield Spread Premiums will not be permitted on sub-prime loans- if the customer only qualifies for that type of loan, the broker will be limited to up front fees. Closing costs must increase for the customer, possibly halting the transaction. Of course the broker could take less fees, many will, but expenses remain the same. The net effect is government putting a limit on income. Not very good policy is it?
Clarifies that principal and branch offices cannot be located in personal residences- How would you feel as a Realtor if you had to go out and rent a commercial space and incur the additional costs, even if your business model or situation did not require it? This will drive out competition and increase costs to consumers. Does this make brokers more professional?
Requires additional pre-licensing education and a credit score of 600. Would you qualify?
All brokers must maintain a net worth of $25,000 and at least $10,000 in liquid assets at all times? Now it is getting expensive to operate and maintain the business-especially in an economic downturn. And again, does this make them more professional.
Increase the number of quarterly reports on origination activity and additional filings. Bureaucratic nonsense that helps no one.
So, how would you feel if the government told you that it would limit your income, force you into keeping liquid assets in your business even if your accountant says no or face revocation of your license, be in violation if your credit is blemished, and keep you filing reports that literally mean nothing to most practitioners?
This is going to drive many good and honest people out of the mortgage business. People that have never ever originated sub-prime loans. The banks have won another battle to close down another competitor. They were able to shut down the Savings and Loan industry in the 80's and now will get back all the business that they lost to mortgage brokers. They lost that business because they were too expensive, unresponsive to customer needs, and arrogant in their power. Most consumers will now pay more for their mortgage, will not be able to shop their mortgage for better fees and rates, and ultimately be at the mercy of the banking machine. As Realtors we already know what type of business model banks have in dealing with REO property. More of the same is coming.