Death of the Mortgage Broker?

Mortgage and Lending with Capstone Mortgage, Inc.

Mortgage brokers are becoming a dying breed.  Across the nation, mortgage brokers are finding it more and more difficult to survive.  During the beginning of the mortgage industry debacle, many of the problems within the industry were laid at the brokers' feet.  Commonly cited reasons for the meltdown were exorbitant fees, higher interest rates than necessary and putting borrowers in homes they could not afford.

In the vast majority of cases, these claims were unfounded.  As the mortgage crisis has continued, it has become pretty clear that the brokers are not the ones to blame.  It was not the broker that pushed for programs for borrowers that were not credit worthy.  Fannie Mae and Freddie Mac, at the urging of our government, pushed for programs that allowed borrowers to buy homes with little or no down payment.

Programs were developed that allowed for borrowers with low income or income that could not be proven by traditional methods to buy homes.  Common sense rules about debt to income requirements fell by the wayside.  Borrowers could state an income that sounded reasonable and even state the assets necessary to close their loans.

Interest only loans were made available.  None of the borrowers' payment went toward principal reduction of the mortgage.  While that may be fine in a time of quickly appreciating home prices, it is devastating in times when home prices are falling.

There were even loan programs developed that allowed the borrowers the option of how they would repay their mortgages.  The borrower could elect whether to pay a fully amortizing payment, an interest only payment, or a minimum payment that was even less than the interest only payment.  This last option resulted in a negative amortization.  Again, that works if home values are appreciating at a rate fast enough to offset the negative amortization.

It was not the mortgage broker that developed these programs.  These programs were made available by the big lenders and the brokers were encouraged to use them.  Now, many mortgage brokers find themselves struggling to survive because of the faltering mortgage industry.

Will the mortgage industry turn around?  In time it probably will.  People whose livelihood is dependent on this industry can only hope that prudent measures are practiced to insure this never happens again.

In the interim, many brokers and loan officers are being forced to search for ways to supplement or replace their incomes.  Home based businesses and network marketing can offer viable solutions.  Many of the skills honed for years in the mortgage industry can be used in these endeavors. 

Go to  to see one opportunity.

Scott Geary
Infinity Home Mortgage Company Inc - Allentown, PA
Your Pennsylvania Mortgage Source

On mark Dan! The way I see it, conforming lenders and sub-prime lenders some how got confused as to what there market actually was (greed?). Fannie and Freddie bought deeper and deeper in attempts to gain more market share while the non-traditional lenders lowered rates and increased LTV's in order to grab a little of Fannie and Freddie's action. We watched it happen for years. The bubble just had to burst! I'm now concerned about the path that FHA seems to be taking. Although seems more stringent guidelines are on the way. Very well written piece!

Dec 03, 2008 12:42 AM
Chuck Carstensen
RE/MAX Results - Elk River, MN
Minnesota/Wisconsin Real Estate Expert

I think Home business are a great way to supplement the income.  Of course many would rather get a job like being a bus driver...go figure.

Dec 03, 2008 12:46 AM
Dan Chambless
Capstone Mortgage, Inc. - Hoover, AL

Thanks for the comments.  I think the concern over FHA is well founded.  I know in our area, it has almost become the new sub-prime.  With the increased volume of mortgages insured by FHA, delinquencies are sure to rise.

As for the home based business, we has mortgage people and as real estate agents have the skill sets to make home business a success.  We're used to managing ourselves and our schedules.  Also, we know how to sell.


Dec 03, 2008 12:53 AM
Mike Klijanowicz
Cummings & Co. Realtors - Perry Hall, MD
Associate Broker @ Cummings & Co. Realtors

But, if I have a client who has good credit and a decent amount of a down payment, why should I send them to a mortgage broker who will charge them more money than if I sent them to a direct lender who will not charge origination fees or discount points?

Dec 03, 2008 01:11 AM
Dan Chambless
Capstone Mortgage, Inc. - Hoover, AL

In many cases, a direct lender may be the best choice.  I'm a direct lender and also have worked with many brokers through our wholesale division.  There are a lot of really fine brokers out there.  They provide outstanding service for their customers.  It's much the same for real estate.  A borrower can search and find the least expensive way to purchase a home...for sale by owner, cut rate commission agents, etc.  However, they are going to get the best service by paying a little more and using a well qualified agent.

Dec 03, 2008 01:34 AM
Scott Geary
Infinity Home Mortgage Company Inc - Allentown, PA
Your Pennsylvania Mortgage Source

@ Michael - There are several reason to look into a broker vs. a direct lender. Wholesale rates vs. retail rates. Generally direct lenders rates are a tad higher due to costs of overhead, employee benefits, marketing, etc. Availability of several lenders within a broker shop vs. one at a direct lender. Even though Fannie, Freddie and FHA have guidelines. Individual lenders have 'overlaying gudlines' that will be somewhat different from the agencies. A broker can place the applicant with the lender that would be more likely to approve that loan. Additionally, some brokers are local sharing a vested in the community that you are doing business in. Also, good brokers come with years of industry expirience that are often times greater than the Loan Officers working with direct lenders. As always, it's important to compare rates and fee's whenever one shops for a mortgage. Using a direct lender is not always the best avenue for your clients. Dan, sorry if I offended you by responding to Michael.

Dec 03, 2008 01:36 AM
Dan Chambless
Capstone Mortgage, Inc. - Hoover, AL

Not offnded at all...very well said

Dec 03, 2008 01:40 AM