Are Mortgage Brokers Ancient History in 08?
By Moe Bedard
The mortgage and real estate industry has resembled a battlefield marred with carnage and destruction with what appears to have no end in sight. 210 imploded lenders and thousands of mortgage, real estate professionals and anything related to these professions in one way, shape or form, litter the path of no jobs and no hope.
The bad apples spoiled it for the good apples. Loose lending standards and easy money for everyone (loan officers, real estate agents, appraisers, homeowners, investors, lenders and anyone associated with real estate) may have killed this business for good.
A black cloud is following many of the good people in the mortgage industry as they try and find employment to no avail.
Many have said they can’t find a job outside the industry because there is now a stigma associated with all mortgage professionals. Lack of regulation on the loose cannons and bad seeds, resulted in unscrupulous mortgage broker, chop shops sprouting up in almost every neighborhood in the country. Churning out cheesy, unlicensed loan officers, fresh out of high school, that sold one toxic and fraudulent mortgage after the other.
Unfortunately, it may be difficult to decipher the good broker from the bad broker because many borrowers were victims of the old wolf and sheep’s clothing. So, human tendency is to just place blame on the whole lot of them.
Trust is not going to come easy and brokers may never get a chance to earn that trust back.
Hell, I remember real estate and mortgage fat cats that were selling and lending on homes here in Corona, Ca. by the bunch. $50,000-$70,000 gross commission months were common. Brand new Cadillac Escalades, 750 BMW’s and daily sushi and Martini lunches were the norm.
They themselves jumped in on the investment bandwagon and gobbled up multiple properties all over he inland empire.
Now, well, let’s just say that they are way in over their heads. Those $50k months and sushi lunches are ancient history. Most are lucky to get a deal a month and are working just as hard, if not harder, for a much smaller piece of the pie. Many have given up and decided to throw in the towel because they feel there is no hope or dignity left in the business. Some have taken low paying jobs wherever they are lucky enough to get hired.
A lot of these professionals are 10-20-30 year respectable industry veterans with educations and impressive backgrounds.
Just take a look at the local MLS, Riverside County Notice of Defaults or Trustee Sales and you will find several prolific agents, mortgage brokers, contractors etc. that are listed for the foreclosure auction block. I will give them the respect and not mention their names here, but it is quite a list.
Many lenders are slowly but surely cutting off access to mortgage brokers by closing down their wholesale channels. The day I saw that Bank of America announced it was closing down it’s wholesale business back in October, I thought to myself that this was the beginning of the end of the mortgage brokerage business. B of A is one of the more conservative players and survivors in the lending game. Many suspect that the other major players will soon do the same.
If more lenders follow suit and shut down their broker business, this will mean that there is no way a broker can survive. Couple this with an already severe mortgage and credit crunch and you have a lethal cocktail for the mortgage broker professional.
There are just not that many loans to be had out there and there isn’t much money being made. These people need food and shelter and selling mortgages or real estate doesn’t seem to be cutting it these days.
Yes, there are mortgages being made and deals being done. But it looks like most of the business is being completed on the retail side of the lending industry and many seasoned mortgage brokerage vets have already jumped ship to go work for the man 9-5.
I’m sure I am going to get the comment from the guy who is still killing it on the brokerage side and even doing better now then back then. But either A, You are a BSer or B, you are of the extreme mortgage and real estate professional minority.
There have been many rumors circulating of other lenders are going to shut down their wholesale channels in early 2008. With lending guidelines so tough and such a small mortgage market, isn’t that the common sense business move for lenders to make?
Isn’t this a perfect time for lenders to just dominate, consolidate and own what is left when this market finally turns around? Is this the perfect time for Countrywide and other servicers or lenders to expand their services into real estate service companies? Think about the massive residential REO portfolios that they need to manage and sell?
This isn’t about saving an industry, it’s about business survival. Make no bones about it. When people and massive companies are in survival mode, they make common sense and wise cut throat business moves to increase their bottom line.
Wouldn’t one of those moves for the lenders that are left to cut out the middlemen and the commissions? Do lenders really need brokers anymore, now that subprime is a thing of the past? Will non-profits now be the conduit for borrowers and lenders to keep the greed out of the equation. (one of my theories)
There are long time veterans like Joe who believe and hope that they will survive;
I have been in the mortgage business as a broker since 1990. The situation we are experiencing now is not all that much unalike the S&L crisis of the early 90’s. Simply put there were a few “bad guys” that caused a lot of grief for a lot of people. And, in time, we survived.
Most mortgage people do a good job. Unfortunately now those of us who are left will have more legislation and regulation. In stead of more legislation and regulation, government should simply enforce the existing ones. Layering legislation will not eliminate the “bad guys”. As always they will simply figure out a way to get around it all. Pulling their licenses and assessing penalties swiftly will go a long way.
Anyway, to sum up, the mortgage banking/broker community is a tremendous marketing system. We need it and all of the good mortgage professionals to help many, many people in the next few years. So hats off to the “good guys”. Don’t quit
Is Joe fighting a losing battle or will mortgage brokers survive in 08?
One things for sure, the smart people that are left in the turbulent mortgage industry waters are devising an emergency back up plan and exit strategy because from the looks of things, the horizon isn’t looking to sunny.
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Dec 27th, 2007 at 3:30 pm
Honestly, this is very extreme . Where do you get your data from. This is a very biased article with very little factual data to support your opinion.
Dec 27th, 2007 at 3:33 pm
Good and fair dealing mortgage brokers are here to stay. We positively impact the lives of so many people. To think that all the positive that has been done for years, will all of a sudden disapear. Not going to happen. Our volume is up over last year and next year even better.
Dec 27th, 2007 at 3:39 pm
Kate - it’s an editorial opinion. very little factual data? are you living in a bubble where you do not get out much?
Joe - I knew I would get some brokers saying biz is up, but I already commented on that in this post. FYI - Just have a back up plan sir. Never hurts, even when you are overly optimistic.
Dec 27th, 2007 at 3:45 pm
Good mortgage brokers?? Very rare indeed. This country is built on greed. Nobody cares about there clients anymore. We are living in a very sick country. Wall St. cant be trusted, the gov’t certainly cant be trusted, and the mortgage industry has joined the pack of wolves. Now the next scams i see happening is credit repair, life settlements, and debt settlement. I am so thankful I am debt free and rent.
Dec 27th, 2007 at 3:52 pm
Nice insight. Thanks for a great article!
Dec 27th, 2007 at 3:55 pm
Good Editorial - I hope it is wrong. I have been in this industry for 31 years and have seen the ups and the downs. Opened the first wholesale office for Far West Savings and Loan in Northern California outside the Bay Area in the mid 80’s. Back then it was us and Sunrise Mortgage doing wholesale. It has been a long and fun ride. The banks fought us in the beginning and it has always been a love hate relationship. We will survive, but in case we don’t, would you like fries with that order?
Dec 27th, 2007 at 4:08 pm
Now you’ve got to be kidding me. Let me guess you work retail? The reason brokers will be around is because we’re smarter than you. We realize that the costs you’ll endure will always make us more profitable obviously depending on scale. I can work from my home with a $800 laptop, $350 all in one, and a couple of online accounts (credit,point,leads). Make $6000/mo selling 2 loans to some small start up regional bank only charging my borrower 1.5% ysp beat your rate by .5 and your costs by .5% or more(average LA 250K). You and all the other retail/bank people just don’t understand that we were 75% of the business coming in up until recently, you can’t believe how many of us kept in touch with our old clients. Is it going to be tougher to find 2 clients a month YES will I still play 4-5 rounds of golf a week YES…Good luck with your PREDICTIONS career, your going to need it.
Dec 27th, 2007 at 4:11 pm
I think that your article hits it right on the head! It comes down to survival and the banks want to survive. Unlike the references that are being made to the S & L crisis, this time it is a global issue. Foreign and American investors will NOT touch our securities, in fear that they will lose milllions. Why? Too many hand in the pot and no guarantee that what they will buy is not just smoke and mirrors. The solution..simple..eliminate the possibility of tampering with the loan…this means no MORTGAGE BROKERS or APPRAISERS that can monkey around with the loan package. So banks are now forced to keep it within the retail, under their control, to assure that they will be able in the near future to start the investment engine again..
Brokers don’t want to hear or acknowlege this fact… it isn’t about your little 5-10 loans a months..the banks need the investors and they are going to do whatever it takes to keep the billions of dollars flowing..
Brokers don’t like it then complain to your precious NAMB..who did what for you except, collect your membership dues? And what are they doing now to protect your industry??? NOTHING!! WHY? Because they don’t control the money of wall street….the banks do..and there is NOTHING they can do about it! They know it and won’t admit it to any of you…
Dec 27th, 2007 at 4:15 pm
Mortgage brokers are taking the biggest beating in the shakeout, but will re-emerge. The model just makes better sense for the CONSUMER to go to a broker, rather than to trudge from bank to bank shopping for the right product. And yes, from the CMO managers to banks, the brokers, and the borrowers all are guilty of greedy exhuberance.
Dec 27th, 2007 at 4:15 pm
When anyone loses a profession its a saddening and hurtful experience. I have had bad experiences with real estate and mortgage brokers but I did not blame the whole industry. That is too easy and convienent. I have learned to sell my own properties and use cash to buy property as well. I really believe people can sell their own homes without a realtor and of course I will get the RE professional telling me to take a hike. I understand as well its a business and that perspective is appreciated. From where I sit I have taught my whole family how to buy and sell property without a RE agent. Call it a saver of about 6%. Who knows their own property better than the person that is selling it? I believe the RE profession will be a thing of the past as well as the mortgage broker. They crowed way too loud when the going was good and people will not forget that. I also know the Mortgage Brokers Association and Real Estate Agents Association kept up the cheerleading even when the situation was dire. The truth would have been easier and much more appreciated that cheerleading because your industry was in free fall. In a act of genorosity I wish all of you the best in searching for a noble profession. Its about time.
Dec 27th, 2007 at 4:15 pm
OK in that scenario I guess the banks don’t want to make money off of us little guys anymore huh? Filling the chest with loans for the servicing portfolio’s. Getting their small margin on all of the loans they touch before they sell them off. To WHO? I suppose your going to ask. Don’t know maybe the same people the banks sell too. Investors aren’t stupid they want and need us because they surely don’t want all the power to be in the banks..BECAUSE THEY LIKE MONEY TOO YOU MORON.
Dec 27th, 2007 at 4:18 pm
Ann
Lets play nice in the sandbox with the kids who arrived on the little bus!:)
Dec 27th, 2007 at 4:19 pm
Sorry Ann I meant Aaron. My bag.
Dec 27th, 2007 at 4:21 pm
wow, you really don’t like brokers or must have been burned. when i look at the drug industry, the investment industry and about 12 other diffrent industries. i can only say where is there an honest i care about my customers needs before mine industry. let’s not be so fast to kill the mortgage guy there is a couple of others that have gotten away with a hell of allot more. how many investment advisors gave a thumbs up to the market before the crash. fundamentals didn’t matter…
Dec 27th, 2007 at 4:27 pm
It’s a shame Aaron has no conception how secondary works. And Comicpro’s assertion that “Who knows their own property better than the person that is selling it?” makes me laugh.
However, I’m writing to ask you to tell me more about your theory that non-profits now be the conduit for borrowers and lenders to keep the greed out of the equation.
Thanks for a grimly accurate article.
Dec 27th, 2007 at 4:29 pm
Aaron- Investors have no say so on what lenders do and brokers have no power when it comes to what Countrywide, CITI or any lender decides to do in regards to its business.
Do you know that lenders have to buy there loans back if there is fraud in the origination process? That’s alot of buy backs they are going to incur over the next few years and these losses will continue.
you said, “You and all the other retail/bank people just don’t understand that we were 75% of the business coming in up until recently”
well duh! until the subprime mortgage market imploded….
YES…Good luck with your loan officer career, you’re going to need it. I am not wishing anyones financial demise and I am not predicting that this industry is dead. But I think that it would be safe to say that the horizon doesn’t look to good for the mortgage broker and it might be wise to explore other opportunities while your cashing those checks.
Dec 27th, 2007 at 4:31 pm
Robert Brett Curtiss,
I am only assuming you are somehow involved in the industry. I give people the benefit of the doubt when it comes to the ability to learn things on your own. I have a great persistence in seeing things for what they are and not what people make them out to be hence I learned to sell my own properties. So I am going to go on a limb and say a vast majority can sell their own property given correct advice and a good RE attorney. By the way I am a professional comic so your laughing is expected.
Dec 27th, 2007 at 4:34 pm
Robert - Millions are being funneled to non-rprofits to clean up this mess. There is talk about having home preservation centers in all major cities that will be ran by non-profits.
Take a look at NACA.com and you will see the future of this business. This model might be the mortgage model of the future.
Dec 27th, 2007 at 4:40 pm
Hey Moe,
I’m curious about your theory that the conduit between borrower and lender might be the non-profit organization in the future.
Who would be the players and how would it work?
thanks
Dec 27th, 2007 at 4:41 pm
Comicpro - I agree with you. The market, price, location and sign in the yard sell homes, not real estate agents. Help-U-Sell dominated in Corona, Ca. during the boom because people were sick and tired of hiring an agent for $30,000 and the home selling as soon as it hit the MLS. It wasn’t the agent that earned the money at all.
The only extreme advantage that Realtors have is the MLS and vast network of professionals that access this data and disseminate it to their clients. This alone can be very valuable when a quick sell is needed.
If you have time, by all means, you can sell a home yourself with a trusted advisor or attorney.
Dec 27th, 2007 at 4:42 pm
Its obvious you were not one of the people in the business who made money in the past. Take your own advise and get out of the business, do yourself another big favor and don’t become a columnist. There’s enough negativity in our industry now without help from “poor me” attitude, bs article.
Dec 27th, 2007 at 4:43 pm
Take a look at all the major non-profits boca. http://www.NACA.com, http://www.nw.org and http://www.995hope.org, these are the major players of the future and look who is on most of the non-profit board of directors, oh, lending executives, what a surprise.
Dec 27th, 2007 at 4:45 pm
Most of the Liar loans might have been done by Brokers but the next batch of loans that will be hitting the fan- the Pay Option ARMS- that are destined to take down the OC, LA, SD and Northern California were done by the kids in retail. Kids who had to slap those pre-payment penalties and push the 1% rates to make enough for their 30% split. That is where the Banks will need the Brokers with the experience to get those loans refinanced or finance those FHA transactions that will be sold in what used to be High cost areas.
Dec 27th, 2007 at 4:45 pm
Thanks Moe. I just get tired of the “you can’t do it because you don’t know sign” they hang around their scrawny necks. Oh sorry real estate folks!
Dec 27th, 2007 at 4:55 pm
Moe is dead on with his “opinion”. Don’t beleive it? Just wait 120 days!
If any of you have been paying attention, this has been a clear signal being sent over the past 4 months.
I’m sorry to say, but by the end of 2008 the mortgage brokerage segment of the industry will most likely be a memory.
Good luck to all….
Dec 27th, 2007 at 5:00 pm
Yes Aaron you are correct…THE BANKS DO NOT WANT TO MAKE MONEY OFF OF YOU! Why? Because today, Goldman announced that Citi may have an additional 18 BILLION in write offs..Do you call that making money off of you? No..you and your industry are now a huge LIABILITY to the Banks..wake up and smell the extinction…
Marvin..it is obvious that you don’t want to face the reality of life after a six figure salary..People in the industry that are leaving are facing the reality of 40-60K or the expense of learning a new trade..hard to accept that you may have to sell your McMansion or turn in the leased BMW..
Those that will survive in your industry are the ones who did not adjust their lifestyles to a wannabe Donald Trump..because survival will mean accepting a job with one of the banks that make it through…
Dec 27th, 2007 at 5:02 pm
Aaron, what you fail to understand is that you are not going to be able to sell those loans at 1.5% YSP and beat the banks retail pricing because you’re not going to have a place to sell that loan at all. Everone is looking for a scapegoat in all of this and guess who that scapegoat is going to be? You got it, it’s YOU. This has nothing to do with reason or logic, right or wrong, it’s just simply how this country works. Something goes wrong and someone gets blamed and the easiest and really the best target because of a definite history of abuse of the system is brokers. It’s time to face facts, who else is there that’s going to take the blame? Do you think the government is going to take the blame? Everyone knows the government was lax and not paying enough attention to what was going on, and they definitely are a good place to lay blame, but we all know that isn’t going to happen. Do you think the monoline lenders are going to take the blame? They’ve already shut their doors. Do you think the banks are going to take the blame? They have more lobbying power than the pharms industry. Do you think the secondary market is going to take the blame? It barely exists anymore, and the secondary market is mostly seen as the victims of this debaucle despite the fact that without their willingness to buy risky loans the subprime market would never have existed. So, I’m sorry to say, that leaves you. Believe me, I feel for you, I have a lot of friends who are brokers and I was a broker for years until early this year I saw which way the stink was blowing and got a bank job because I wanted to stay in the industry. In closing, good luck with your anger problem and your golf game, I hope you socked away some rainy day money because you’re going to need it.
Dec 27th, 2007 at 5:04 pm
Marcia - I am aware of this and of course retail had a huge part in the crisis. But they have deep pockets backing them up private meetings with our Sectretary Treasurer.
I have a good friend that owns an ethical, major bokerage here in Corona and he is fighting and not giving up. He also thinks that brokers will survive. Sometimes he says I am negative, while I can be, but I am more of a realist.
I am not one to eat a crap sandwhich and say, “this is the best sandwhich in the world!”, No, it’s a crap sandwhich and it definitley taste like crap. However, I will hopefully be eating a turkey on wheat tomorrow. That is being a realist and telling things like they are.
I look at the industry and things do not look good for him and I just hope everyone realizes that there is a lot of crap sandwhiches going around and a lot of people are claiming they are eating turkey sandwhiches when we all know, that isn’t the truth.
Comicpro - hahaha
Dec 27th, 2007 at 5:08 pm
Too many brokers where made bankers overnight with easy to attain lines of credit, now those bankers will be brokers again or move on to other careers it is just a way of the market correcting itself it will pick up again cause banks can’t handle the volume and most of them will need to consolidate or close in 2008/2009 due to lack of profitability it is sad if mortgage related experienced people can not find jobs due to the housing stigma they are very talented individuals this will be mistake and shameful for Hiring Managers, and remember what goes around comes around, every industry suffers at some point in time.
Dec 27th, 2007 at 5:23 pm
I have been in the industry since 1975, before Brokers. When brokers first came into the picture they served a specialty niche (subprime) aimed at people with poor credit and provided a great service alternative to the retail banks. That niche is all but gone today. The lending world did quite well before brokers and will do just fine without that segment of the industry.
Dec 27th, 2007 at 5:41 pm
Moe, this is an excellent article, and not being a mortgage professional I still can see the writing on the wall — or maybe it’s because I am not a mortgage professional and I’m not blinded by my own desperate hope.
However, I do work in the legal industry and believe me, Nick is right on when he says that if there’s going to be a fall guy, and there will be — it won’t be the government or the banks.
Comicpro, I used to have real estate agents come by to show my apartments. They do absolutely nothing. They’d sometimes have the person come by without them and give them the address and then still collect their one months rent, some even asked for 12% of the yearly rental. When it comes to selling houses, it’s even worst.
I think that is why the industry attracted so many dishonest, shady people. Easy sells, easy money as long as a person has the gift of gab, that will always attract the scavengers.
Disclaimer: I am not talking about ALL mortgage brokers, loan officers and real estate agents, just the ones that were guilty as sin. You know who you are
Pointing to other industrys that are dishonest is a poor excuse.
The bottom line is when it comes to the huge loss of money for the rich, somebody is going down. In this case, I think Moe is right, it just might be a whole industry.
Funny, I was watching A Christmas Carol over the holidays and spent some time thinking about the character Mr. Scrooge. Soooo many centuries have gone by, and the money lenders are still considered and regarded as the bad guys.
As a matter of fact, even in biblical times they had bad reps.
I guess it is true, the LOVE of money IS the root of ALL evil!
Dec 27th, 2007 at 5:45 pm
Moe — you are correct — the majority of mortgage brokers will not survive 2008 because of “no consumer confidence” in the concept that the mortgage broker is acting for the consumers’ behalf. And those mortgage brokers that manage to stay in business will have to execute new contracts with the remaining wholesale lenders that will include “buybacks” & “personal guarantees” as well as “commission recovery” for loans that have a delinquent payment … say in the first 18 months … as long as a material misrepresentation of fact is found on the 1003 … such as stating incorrect income or assets to make the deal work … or credit “repair” in order to manipulate FICO scores to meet guidelines.
Dec 27th, 2007 at 5:56 pm
What happened aftert the S&L Crisis of the early 90’s…than the fallout of the 125’s in the late 90’s and now the subprime Crisis of the mid 2000’s. It is all part of the cycle going up and coming down hard. After the smoke clears and the industry as a whole, banks/lenders/brokers have a chance to put thier thinking caps on, if they have not already started, they will come up with new programs to do one thing. Fund loans. yeah it will be tougher and many of those landscapers may not qualify for loans, but the business is going nowhere brokers included. There are plenty of honest brokers still helping people in this mess of a time in the industry.
One question for all the people who think the banks are perfect. Who came up with those creative programs and paid Commission to thier AE’s to push them to all the brokers and funded those loans. yeah plenty of brokers cheated everyone by misstating income or doing flat our fraud, but if the lenders did not come up with SISA, NINA, NO DOC and all those programs they would not have been there for the brokers to sell. Think about the Professionls selling Neg Ams… Downey Savings, WAMU, World Savings, they crafted those loans and built in the PPP and everything else. Brokers may end up taking the blame but the problem was industrywide. Greenspan made a statement that he could never have really forseen the true impact of the subprime market…BS in CAPS that old man is very smart and the Bush Administration needed some part of the ecomomy to flourish to help fund thier OIL war. Things are much bigger than brokers doing LIAR loans.
Dec 27th, 2007 at 5:58 pm
Banks will accept loans from brokers (and correspondent lenders) as long as they can make money doing so. Some, being ignorant, are afraid to stay in wholesale. Others, being more sophisticated, will remain and thrive - if prudent. The key to avoiding credit losses is relatively conservative underwriting. They key to avoiding runoff losses is to never pay more than about 100.875, all-in. No Cost loans are great for LO’s & lousy for servicers. Wholesale account reps and loan officers will always belly-ache about limited product & pricing options. The ruination of a bank’s mortgage division is trying to be all things to all people. Smart banks will say “Here’s what we have, take it or leave it.” Good loan officers can sell borrower into the pricing & product options that will remain.
Dec 27th, 2007 at 5:59 pm
Definitely an interesting article. I’ve been in the industry since the early 90’s and have worked as a loan officer, middle manager, and executive over the years from small companies to big banks, from retail and currently in wholesale and as much as I hate to say it, or even admit, but things will get worse before they get better. Am I concerned for the future, very much so. Am I thankful that I can still work in an industry that I love and still pay the bills, definitely yes, but I know so many more that are unemployed and suffering because of unethical practices and no morals. Could I have made more money doing fraud, like so many others did, yes, but at the cost of my conscious, no. I’m glad to see all the fraud cases being pursued and I hope all of those who hurt so many, including all of us who did it the “right” way, go to jail or at the very least, get what’s coming to them. Life has a way of balancing everything out. So I hope you enjoyed it while it lasted.
For those of you that made money and started living the “champagne” lifestyle, lesson learned: save money! As for me, I paid off most of my bills. Yes I have a BMW, and yes I have a nice house in the hills, but that’s because anyone who knows how this industry works and understands it, planned for this “correction.” None of us expected it to be this bad, but you’d have to be foolish to think it was going to last forever. So for all you people that got rich quick with no clue as to how you did it, and now don’t know what to do, sorry, maybe you should’ve learned the business before you started destroying peoples lives for the sake of a commission check. I don’t feel sorry for you. I spent years, 7 to be exact, as a loan officer learning my trade, before I got into management, and to this day, I deal with brokers who have no clue as to what they’re doing. Those brokers will be extinct and soon. Brokers who know what they’re doing and can change with the market, and have ethics, will survive.
For all the good guys out there, I wish you luck and hope you find something soon, or I hope you survive this mess to come out stronger in the end, and when this market does turn, only “true” professionals will be around to reap the rewards, whether they are brokers, bankers, or corporate big boys. Those who know how to survive, will! Those who were here for easy money, see ya, good bye! Go back to selling cars or whatever it is you did before you spoiled an industry that so many depend on.
Happy New Year to everyone. I hope the new year brings you all peace, prosperity and happiness, god knows, we could all use it!
Dec 27th, 2007 at 6:04 pm
BROKERS are the most uneducated and arrogrant morons I have ever dealt with.
I have worked as an AE for several years. Since I do have skills and know the business..I am now working the retail side as that is where it is all heading as we have discussed in meetings.
1 yr BEFORE the mortgage crisis started..the lender I worked for would inform us in our monthly meetings telling us that this crisis was inevitable as changes were going to happen. We were told that subprime market was going to take a big hit. The times of overwhelming business were going to come to a halt. We were told that record guideline changes were going to take place in the lending business. 100% stated was going to go away by 2008. We were told that there were going to be record foreclosures and that lenders and banks were going to be haunted by all these bad loans that were closed in the past couple years.
I sat there and talked to all my brokers and their owners about these issues..all these arrogant individuals would say
“oh they will never take 100% stated away, of that will never happen…how will they make money.” I would point out “what is the point of continuing this type of business all these types of bad loans if they are all just boloney bad deals that are going to cost everyone money and losses?” “obviously it is going to happen if all these deals come back as losses”
still these brokers said it would never happen and that lenders need them to survive.
In my honest opinion..only the ones that know how to read rates sheets, and can read a program and actually want to learn… will survive.but the majority of the brokers I worked with..had no idea..how to structure a deal, read a rate sheet properly or calculate borrowers incomes…
all they knew was how to take a person for all their money.
also.a private study has learnd that borrowers who paid closing costs upfront and had a ysp included in their transaction paid more in closing costs that a borrower who paid nothing upfront, and had a retail bank pay their closing costs. This argument was discovered after brokers were claiming that the ysp help cut down on the borrowers costs.
Do you people know what a ysp is? Do you know what a rebate means
? definition is ” a return of a part of a payment ”
this means that money belongs to the borrower for accepting a higher rate.
if you shop at a store such as Home Depot and you get a rebate..as a customer..who gets the rebate? the customer or the saleperson?
put it together..figure it out.
Brokers are crooks and thieves..period.
I am for more regulation.
Dec 27th, 2007 at 6:08 pm
Hilarious… Yes, there have been loans that brokers have done that have gone bad. There are also just as many that were done in the retail arms of Countrywide, Wamu, Chase, Bankofamerica, and my super favorite Ameriquest. While pointing your finger of fraud at brokers, please feel free to point them at these retail outlets as well. Ask any of the loan officers at these “shops” how to get a loan by an underwriter and you will get a huge amount of fraud ideas you never even thought existed. And it still is going on at some of these places. In 2005 the State of Illinois required all of its loan officers to pass a competency test and get licensed. We lost about a third of the loan officers in the state. Funny thing though. The loan officers who didnt pass a basic skills test went to work for the above companies that did not need to be licensed.
So the banks pretty much picked up all the sh*t loan officers and paid them a salary to write fraud loans with no knowledge of what the hell they were doing.
Yes, the banks were there before, but they still dont know sh*t about originating loans. That’s a broker skill.
Dec 27th, 2007 at 6:12 pm
THERE is fraud in every single industry on the planet. We just built too many houses for the buyers we have. When the supply is gone lending will be back but since the government is getting ready to bail everyone out to the tune of 10 trillion THEY WILL TAKE OVER THE MORTGAGE BUSINESS. US Taxpayer is the new subprime lender. This is the Enron stock scandal and the 92 housing meltdown TOGETHER, getting uglier by the day……………big players are going to disappear in banking, wall street and building and all the industries tied to that group. The S and L’s took the loans from the banks in the 80’s, the brokers took them in the 90’s and now the government will own it all and pick 5 banks to be the conduit.
Dec 27th, 2007 at 6:12 pm
Wholesale represents over 60% of total production. Subprime represented less than 20% of total production during the past few years. There are plenty of direct lenders with zero or a very limited retail footprint. Are you suggesting that all these lenders will go out of business in 08? TBW, Flagstar, Provident, …?
Dec 27th, 2007 at 6:13 pm
I and my former manager made this call 6 months ago. I left the industry after 18 years and my former manager went to work for “The Man” at Wells Fargo, where he tells me he still has all the products available he had before. I saw the writing on the wall when banks like Indy Mac started gobbling up all the retail branches they could buy. They’ll keep the stated income, etc in house and sell it thru their “new” retail outlets and of course thru the internet. Brokers are going away because the big banks don’t need them anymore. The pie has shrunk significantly and although I believe a few will survive because their will continue to be certain lenders willing to sell thru brokers, their products will be limited to Agency and Gov’t; a far cry from 100%, stated income, non-owner occupied, with a 620 FICO - Now those were the days!!!
Dec 27th, 2007 at 6:17 pm
Vegas..
It was good that you back peddled a bit in the middle of your statement there. Broad generalizations are never a good stance to take. I do agree that there are idiot brokers out there, but uneducated… To be a broker you have to pass the test, granted it is not much more that study by memorization but the idiot brokers you are talking about probably worked for the Broker and did not actually have a license. And if all the brokers you worked with thought that 100% stated was never going away then you chose the wrong brokers to work with, or you were just trying to make money like they were from the begginning.
YSP should be there to help get the borrower a lower rate but it really was for brokers to make more on the back. But banks do price in a spread when they list thier rates, do you think they are giving brokers the rate they are getting from secondary, no they are making thier money too. The Good brokers out there never tried to hit home runs on thier borrowers if they were make a ysp and charging a point at the same time. They tried to make 1-1.5% total on the front and back get a good rate for thier client, call them back and keep in touch with them after the loan funded. Saying that all brokers are crooks and thieves is a harsh statement. There are plenty of AE’s who killed it because they had puffy lips fake tits and short dresses and told you to call thier Account manager when the question got to technical. If a Licensed broker did not know how to read a rate sheet, price a deal, structure a loan that was funded before it got submitted to the lender than they are in idiot. But genarlizing is just being ignorant. And coming from and AE who was not required to pass any tests to do his job is unfair.
Dec 27th, 2007 at 6:18 pm
Great article, thanks!
A broker is just a middleman, and adds cost without adding value.
Capitol is simply the surplus value of real productive labor. Without labor, no Capitol.
Therefore, a broker is just a parasite. Money taken for nothing tangible gained. The Commission based business model should be outlawed.
If you think it’s morally correct to charge $20,000 for a few hours of your time, then have the integrity to charge your time by the hour for the fee.
Of course, only a fool would use a broker for $5,000 an hour.
And people say that Lawyers are crooks
Dec 27th, 2007 at 6:23 pm
Don must be a lawyer…I mean crook.
Dec 27th, 2007 at 6:29 pm
If brokers didn’t add value no one would use them. This is still a free market. Borrowers shop around before deciding to use a broker. Don’t they?
Dec 27th, 2007 at 6:29 pm
The banks were going in this direction for many years. The only reason that the brokers have even survived this long is that we have the local connections to people (realtors, accountants, planners etc.) We are the people that drag in customers off the street to do business. Banks wait for customers to walk into their doors brokers go to the customers.
In the last few years the banks have become more equipped to take back the relationship development aspect by creating a accessible conduit through the internet to expand the banks footprint. This was very apparent a couple of years ago. Even as production was falling the rush to get internet appearance doubled. Account execs were even eliminated at some companies, MILA for example, as useless tools (and they were). I told my account execs that this would be the future for originating loans. Why do you think there has been such a push for a paperless process? It’s not about the trees…
In general the last 15 years i have had as a broker have been awesome. even today I still have the network to get a nice volume of loans closed. I always have job offers available to me. I do not have any idea why someone would not hire a loan officer for a different position in another industry.
Dec 27th, 2007 at 6:30 pm
I have worked as an LO for both retail and broker outfits. I know this may not be a popular statement but I have seen more shady practices at retail (banks) than at brokers. Retail Loan officers are under much higher production goals which cause them to do things which may not be legal. Retail LO’s are usually of a lower caliber as a license is not required and banks have a hire en mass and “see who sticks” mentality. Retail loan officers are also paid a much smaller % of each loan which will cause them to charge the borrower more than they should. Overall I have found retail LO’s to be under educated , careless, boring, wolves in sheeps clothing. I spent time originating for Wells Fargo and would NEVER go back. As for the “no more brokers” argument…. I hope it does not happen, but the thing I have learned in this industry is you never know. I also think the industry clean out is a good thing and I have all ready noticed an increase in the caliber of people working in the industry.
The posters original article smacks of jealousy and I woudl imagine it is with great envy he or she writes about the 50K to 70K commision months. I see nothing wrong with someone making money. We live in the United States of America whose economic system as well as cultural and political cornerstones are based on capatlism and the free market. It sounds as if they are almost wishing the broker out of business or just jumping on the bad news band wagon to hear their own horn blowing.
Nick… Retail loans are par priced at 101 so their is allready a 1% origination built into the rate. Lets get something straight..banks do NOT do free loans. It costs a retail outfit MUCH more to process a loan than a broker and they are NOT going to absorb that but rather pass it along to a consumer. If you do not believe me just call any major bank and then call any local REPUTABLE broker…ask a realtor.
Moe… Your statement about the investors having no control over lenders is absolutely wrong! Investors are the ones who purchase the pools of loans or CDO’s by the lenders. Each investor has their own set of criteria and guidelines the lenders must adhere to when originating or underwriting the loan otherwise the investor will not buy it. Thereofore lenders are actually directly controlled by the guidelines of the investors. The only time a lender would not be subject to these guidelines is when they portfolio (keep themselves) the loan. They then can underwrite the loan to thier own criteria.
As for 2008 and the housing market….. I see nothing but FTHB opportunity. With no existing home to sell, interest rates still at historic lows (google the charts), and home prices coming into more affordable territority it is begining to look like a buyers market. Remeber buy low sell high…..not the other way around
Dec 27th, 2007 at 6:31 pm
yes they sure do Dean…And they still get better deals than from certain banks…and sometimes they dont…but not by much…unless the broker is an idiot looking to hit a homerun than he is also out of the business now.
Dec 27th, 2007 at 6:32 pm
All the chest-pounding is amusing, this bubble in no way parallels the S & L crisis. Truth hurts for the middlemen….
Dec 27th, 2007 at 6:38 pm
This article is dead on and there are actually 218 companies out of business as 12/17/08. It will get worse until they loosen up the cash flow. Wall Street and the Govt to blame. They knew what was going to happen and let it happen. So the banks won this round by trying to rid all the of mortgage companies to the wayside. I have been in busy for awhile and it will come back slow. The regulation will make worse for the homebuyer. But the idiot politicians can’t see 2 feet in front of them. The Fed are a bunch of losers since they helped create mess and ruined the dollar. The writer is dead on. That is why I started another company so I don’t get to screwed.
Dec 27th, 2007 at 6:38 pm
While it is very easy to get caught up in the moment and express feelings like you are having Moe, it is also helpful to look back at fairly recent history. Your thoughts are not very novel. In fact, I’ve heard them numerous times in past down cycles, and each time the broker comes back originating a bigger percentage of volume. That being said, I wouldn’t be at all surprised to see many other companies exit the wholesale business. I mean really, when you can’t sell what you have, why bring more of it on? But that will only be temporary - maybe up to another couple of years - unless you think people are going to stop buying homes altogether, or begin paying cash for them; not very likely.
What you need to remember is that while many banks have retail channels, and they can get away from wholesale, what do you do about the non-bank financials, ie, CSFB, Bear, Lehman, Morgan Stanley, Merryl Lynch, who have no retail ability, nor the desire to build it? Unless you think they are going to exit the mortgage business altogether, which won’t happen because it is such a huge source of income (until lately).
However, the main reason why you will be proven wrong, like those before you, Moe, is due to the greed factor. When things turn around, and they will, the quickest way to grab volume is through the wholesale channel. No bricks and mortar, nor leases, no huge overhead, less hiring, less HR hassles, EEOC bullshit, etc, etc.
While the resurrection will take a different form, frankly for the best if they raise the barriers to entry, the business will once again prove to be very viable for the true professionals.
Dec 27th, 2007 at 6:41 pm
Banks make me sick! They act like they are so white and pure like the driven snow. Well I have a news flash for you out there in ferryland! In the last two weeks I have come across two hud-1 from previous loans closed by good old Countrywide retail and when I looked at the origination charged to the client they were both almost 4%! And while I’m on the subject of purity have you seen latley what banks charge the working class smucks for credit card intrest? They are as crooked as they come but they do it with a smile and a suit! They pay there help next to nothing! What everyone at the banks retail level doesn’t pay attention to is the amount of money they sell the loan on the secondary market, because they are not privey to that!It’s about relationships period! Banks do not care about clients and they sure don’t care about employees! Have you seen what some of the exiting CEO’s have taken with them as they left the big banks? This all cost the consumer right?
Dec 27th, 2007 at 6:42 pm
The nail is in Jim
Dec 27th, 2007 at 6:47 pm
What exactly was the broker supposed to do? Wall street says “i want to buy loans with a 620 score 100%ltv Stated Income Investment properties” The lenders say “cool, I can commit to 1 billion a month of this product. The account executive tells his 50 broker accounts ” hey, we have a new silly ass program to sell your clients” The real estate agents ask ” Hey broker, do you have a loan with a 620 score Stated Income Investment properties with no money down?” (they don’t know what ltv means). The brokers put the deals together, the bank underwrites the deal, everyone gets paid, and then someone figures out that the housing prices had a ceiling. The buyers, most of them on their first investment property, had no idea how to get a renter in the property. Now the property is vacant and the price is going down. This whole process could have been avoided if the top of the food chain never offered this to the bottom of the food chain. You give a broker something to catch fish with, and we go fishing.
Dec 27th, 2007 at 6:59 pm
I was a loan officer/mortgage broker from 1994-2007. To my knowledge during that timeframe I had 2 borrowers foreclosed on. I am proud of that record.
Early on, I was taught the simple fundamentals of subprime lending. First was the “3 Cs”; Character, Capacity & Collateral. Second was to never make a loan that did not have a definable FINANCIAL advantage to the borrower. These rules defined subprime. If a borrower was damaged in one of the 3 Cs, there was a loan there, damage in 2 made an unlikely deal, damage in all 3 was a show stopper, and a borrower who had nothing to gain also had nothing to lose and was not a good risk. During the last 2 years I was in the business I noticed some very disturbing trends. They were the reason I got out.
The first problem was a complete disregard for the actual value of “Collateral”. In “old school” subprime, a house was not worth what some idiot was willing to pay for it; it was worth what we could get for it if we had to foreclose. We would never allow a valuation gain of more than 10% in a year without significant physical improvement to the property (not new paint and carpet), and the standing rule was 75cents value gain for every dollar of cosmetic improvement (including kitchen and bath upgrades). When we began to ignore realistic collateral valuation, we started the water filling behind the dam.
The second problem was degradation of “Character” qualifications. I came into this business before credit scoring. We made judgments on the likelihood of mortgage repayment on patterns of behavior. Borrowers needed confirmable 2 year mortgage or rental histories, and these counted for the majority of the decision making process. If a borrower was responsible on the payments for shelter, there was a loan there. The worse the pattern of lates, the less the LTV available. Credit scores are not reliable. I have seen spreads of 100 points between scores on the same borrower with the same information. I have seen 700+ credit scores on borrowers 1 year out of bankruptcy. When a credit score that often included nothing more than credit cards and car payments (sometimes not even the borrower’s) became the decision factor, the water started to top over the dam.
The third problem was was letting go of “Capacity”. 100% Stated Income/Stated Asset loans are suicidal. Especially to a subprime borrower. If you put someone into a loan that there is no rational expectation that they can pay, they won’t. Period. That started the erosion of the dam itself.
Finally, ignoring FINANCIAL BENEFIT TO THE BORROWER so that commissions could be made and loans could be packaged and resold was stupid beyond belief. Moving someone into a new home with twice the mortgage payment because it is “nicer” or giving a huge amount of cash to a known irresponsible borrower for frivolous spending, while ignoring the “3 Cs” was dropping a dynamite charge behind a flooded, eroding dam.
Subprime borrowers are not the problem. They were always stupid with their financial decisions. The qualification/processing/underwriting process was meant to protect the system and the banks from excess risk. We ignored lending fundamentals. We now have a wall of floodwater rushing down the valley. We created it, we deserve it, and we can’t stop it. All we can do is survive it and clean the shit out of our basements after it is over.
Dec 27th, 2007 at 7:09 pm
Bank of America has left the wholesale channel before and re entered when they felt the climate was better. Just because they or any other bank ceases wholesale does not mean it is forever.
I say, dont worry so much about material things, enjoy life you only get one, smile every day, treat others well and before you know it this will all be over.
Dec 27th, 2007 at 7:11 pm
At some time in the future, probably around 2012 when the recession will be over and prices retreat to the old tried and true formula 100x the average rents in the area, I will probably consider buying again, having sold my house in 2003. One thing I can promise and there will be many like me - the last person I would go to for mortgage advice or to arrange my mortgage, will be a broker. Frankly, if I was a mortgage broker at this time, I would be looking to change jobs. I was going to write profession but after the things we have seen in the happening in the mortgage industry over the last 5 years where brokers are concerned, even the word “job” sounds too clean.
As for the poster who has seen this before? Think again. This is a sea change as far as mortgages are concerned and the word “mortgage broker” will be enough to scare most people away and head to their bank.
Dec 27th, 2007 at 7:11 pm
MAKAI…you are right on with everything you’ve stated. Everything.
It’s obvious that the Lenders on here are gonna protect the Lenders, the Brokers are gonna protect the Brokers, and the Lawyers are gonna protect the Lawyers. Everybody wants to bad-mouth eachother and make themselves look good, but, like Makai mentioned, there are very good respectable PROFESSIONAL (in every sense of the word) Brokers and loan officers out there.
The ULTIMATE perpretrator in all of this mortgage meltdown is (drumroll please…)….the people/investors who allowed these programs to exist (SISA, NINA, Option Arms, PPP, 100%, etc.). BOTTOM LINE.
If these programs had never existed none of us would be talking about this and no one would be having to turn in their BMW’s back to the dealer.
Now regarding the people who went to work at Countrywide, or any other retailer during 2002-2006, YOU MISSED OUT ON THE GOLD RUSH! Us brokers made double what you made doing the same amount of work or less. Don’t blame brokers for this. Blame yourselves.
But again, whoever invented these programs and allowed them to exist are the cause of this Mortgage Meltdown. Period.
Dec 27th, 2007 at 7:17 pm
Stop all the words…Don’t wait for your own blood to show up on your own walls before you realize you are not earning what you used to… and stop blaming everyone…life is way to short you have options for another career.
Dec 27th, 2007 at 7:17 pm
Jim H, you’re right on with what you said, at least from my perspective. The mortgage company I’m with now is funding more each month, although be it mostly Conforming, but nevertheless, we’re still funding loans, profitably. The Real Estate Industry isn’t going anywhere and those of us who know how to ride these waves will survive.
In regards to John town, just because you have a Triple Decker Chocolate Fudge Cake doesn’t mean you eat the whole cake. Loan products are designed for certain types of borrowers and just because you have a product you can slam a borrower into, it doesn’t mean it’s the right product for your borrower. It’s called ethics. It’s called educating your borrower, and making sure they know what they’re getting into. It’s called “customer service.” A novel idea I know for many who came into the mortgage industry in the last 5-7 years. I’ve been doing counseling for a non-profit company instructing borrowers, who were never told what kind of loan they got into by their loan officer or broker, what their options are and educating them on the industry and it’s the loan officers job to make sure the product they sell is what the borrower can afford and understands. Option Arms were around long before the refi boom, but we sold them to borrowers who knew how to manage them, not to make 3 points on the back and give any jo schmo keys to a house he couldn’t afford.
In regards to the fraud issue, banks, brokers, mortgage bankers, guilty, guilty, guilty!
I believe in capitalism and all of us having the ability to make as much money as we can, as long as it’s done honestly, ethically, and doesn’t hurt anyone. It’s called responsible lending. This mortgage mess is no one’s fault and everyone’s fault. It’s years of bad practices, greed, and no regulation and monitoring that’s caused this mess. It is what it is………….
Dec 27th, 2007 at 7:19 pm
Thanks Kev. Bashing any one part is ingnorance. There are too many factors involved. there are always going to be good and bad and the brokers will be made out to be the bad guys this time while banks look like the poor guys having all these write downs. they are just as responsible as are the secondary and firstly the fed for making money so cheap and allowing this to start. John Town said it right it started at the top and brokers just took the bait to catch the fish. Fish may be smaller now but they will get bigger again.
Dec 27th, 2007 at 7:27 pm
I am a mortgage banker in NJ. My office is 2 floors above B of A. Almost everyday I would check the posted rates at B of A. I would say that 99% of the time I could find a better deal for my client and still make 1.5YSP. As a matter of fact I could close the loan at B of A wholesale and beat B of A retail by a quarter point. Here is an idea, have every loan officer post a bond and if they commit fraud/lie they should lose their bond, pay a big fine and never be able to write a loan again!!!!!! Countrywide was and still is the biggest fraud in our industry. I have made a great living refinancing their pay-option arm to clients who should have never been placed in that type of loan!!!! instead of a 30 yr fixed motgages, only to be sold a piece of crap loan and Countrywide reps getting paid a ton. I am here to stay!!!! I have not been in a realtors office in over 8 years, all of my clients come from CPA’S, Financial planners , attorneys who trust that I will take great care of there clients!!!!!!! My clients are my best advertisment!!!!!! Repeat business!!!!!!! Sure I could have made more money, but I can go to sleep ay night knowing I did the right thing and that I will have clients knocking at my door for years to come because I am honest!!!!! Honesty has paid off for me and I am glad that most of the crap brokers will be gone!!! I will survive and make more money in the long run!!!
Dec 27th, 2007 at 7:28 pm
Mike,
Maybe if you had consulted a broker you would not have sold your overperforming assett at the WORST time possible. Having sold your home in 2003 you missed out on 2.5 more years off spectacular appreciation rates. Just to think….you could have waited, timed the market, taken the extra gains and retired early…….I guess the under educated lackey loan officer you talked to at the bank did not actually ADVISE you, they just took your order and let you commit financial hari kari.
Can you give me the specific day and time in 2012 I would like to put it in my outlook. Mike…we need to enter a recesion before it can be over.
Dec 27th, 2007 at 7:43 pm
This article is so dead on. Former co-workers and I have been saying this for a long time and I am glad someone finally wrote the article. Writing “mortgage” on your resume is like writing curse words and that’s for job-seekers with college degrees! A recruiter told one of my ex-coworkers to take her mortgage job off of her resume! Take years of hard work off of her resume like it had never happened. She’d be better off saying she was a stay-at-home mom for the last 5 yrs.
I’ve worked with hundreds of brokers in Los Angeles and most of them were not crooks. People wanted these loans regardless of benefit. They didn’t care if the loan made absolutely no sense at all. They didn’t care if they had to go to the slimiest broker in the community–as long as their loan closed. And if one broker/lender refused to fund the deal, another one would have it doc’d and funded by the end of the week.
The reason we are in this mess is because the competition always found a way to show “willful blindness” to unethical (sometimes fraudulent) practices. The reason all of these homebuyers are upset is because they thought they would have more equity by now and they would do another refi. Unfortunately, many brokers and homebuyers didn’t know that lenders would change their guidelines and they would no longer qualify for their own homes anymore. No one thought it would
get this bad. If you say you did, you are either lying or psychic.
Dec 27th, 2007 at 7:52 pm
“The reason all of these homebuyers are upset is because they thought they would have more equity by now and they would do another refi.”
The reason homeowners thought this is because that is what many brokers TOLD THEM so that they could close the deal. Most homeowners don’t spend time going over cost structures and rates and predicting what the market will look like in the next three to five years.
Dec 27th, 2007 at 7:59 pm
gee moe if your such a guru why cant you afford to move out of corona.
or is it you like the smell of horse manure when it rains?
Dec 27th, 2007 at 8:03 pm
Paul,
How right you are. I am in RI and there is a Bof A branch, where I do my personal banking, and a Citizens branch where I do my business banking. I am always checking their rates; every time I see their rates, I smile to myself.
In fact, go on BofA’s website and see if you can’t beat their “NO FEE mortgage plus rates” They are just as bad as any scumbag broker. Yeah, no fee - except for the points! What’s with that? Points aren’t fees? What liars at BofA. I know one other thing - try closing a loan at a BofA branch in 2-3 weeks - not a prayer. As long as they remain my competition, I am going to be around for a long, long time.
Everybody should chill out, step back, enjoy the time you have, regroup and come up with a plan to go forward. If your overhead - personal or business - is too high to withstand this downturn, you probably should get out and go work for somebody. If you can’t beat the likes of BofA on price, service, and intellect (have you ever talked with the morons they hire), again, probably a good idea to get out now!
For those who can hang in through these difficult times, like all the past downturns, we will all reap the rewards of less competition via more regulatory hurdles in the future.
Dec 27th, 2007 at 8:07 pm
Someone call me when everyone stops pretending that they were too stupid to think for themselves. I can’t even tell you how many times homebuyers have committed the fraud themselves. I worked for a Lender and I know the Brokers aren’t to blame here. And since, I didn’t write the guidelines, I am not either. We all played by the rules. All of us. I refuse to believe ALL of the homebuyers just aimlessly went by what BROKERS had to say. Come ON!
Dec 27th, 2007 at 8:15 pm
In October 2006 there were over 500,000 people employed in the loan origination business (includes retail, wholesale, correspondent). As of October 2007 that number is 400,000. So 100,000 jobs gone. See http://www.ml-implode.com for a list of lenders that are imploding. Predictions are for another 100,000 jobs to be gone during 2008. HOWEVER, that will still leave 300,000 in the business, including many independent brokers. I suspect those in the business with good contacts and clients who were solid risks will find themselves staying in the business. Those that took anything with a heartbeat and put them in a loan that defaulted won’t have too much repeat business and won’t have too many referrals.
Also, lenders will figure out who dumped bad loans on them. So, even if lenders don’t shut down the wholesale channel, they may be more selective. I would not write off the entire mortgage broker industry too soon. Also, by 2009 I would expect some lenders to open wholesale channels back up if they can’t make their numbers on their retail channel alone. Lending is a volume game and with the profit per loan decreasing, lenders need volume.
Dec 27th, 2007 at 8:41 pm
When others feel the end is near, the few take advantage of the moment. I am proud to be a mortgage banker!!!!! I can walk on any street in my town and hold my head up high. You know why???? I am honest, I always try and do what is best for my clients and I feel I am rewarded with refferals. A funny thing happens when you do the right thing, you get more business from happy clients.So to all who think the end is near for brokers , I say good bye!!!!!! I am proud of the fact that I do not have any loans that have defaulted…..because when I receive a loan that I know damm well is bullshit or the client cannot afford, I tell them to go away!!!!!! You will thank me in the future. Some took my advice and some wish they had!!!
Make LO pass a real test, get a bond, 24 hours of CE credits every 2 years and be held accountable for there actions!!!!! Retail included!!!!! The bullshit would stop!!!! If we are to be respected, we have to raise the standard/stakes of the people who orginate the loans.
Dec 27th, 2007 at 8:44 pm
I have worked in secondary marketing and securitization for 14 years. I have worked in collections, all the way to trading mortgaes on Wall Street. Subprime is only the “newer” FHA loan. People will always buy what they cannot afford, and our industry enabled them to do it, through whatever channel, broker, retail, or direct lender.
I am accustomed to the days, where when you closed a loan, if the borrower ended up not paying-you were fired. There were standards. You hired people who had 4 year degrees as a minimum, and understood economics, and the secondary market. When Greenspan cut the rates continually post 9/11 to get consumer confidence up, and to get people spending again, everyone and their mother became a broker, or a realtor and tried to cash in. Now they have to learn how to reputably do their job, per the standards that always existed-that they chose to ignore.
I agree with a previous comment, we have another S&L crisis on our hands. But, those who are educated, have been around for a while and understand the secondary market, monetary supply and macro and micro economics will be ok.
I am not worried, with an MBA in Finance, and a CPA, there is always some place to work. If worst comes to worse, I will work for HUD, FNMA or FHLMC.
Dec 27th, 2007 at 8:46 pm
I want B of A, Wamu, Countrywide and other lenders around!!!! They make me look good!!!!! I have better rates, service and put my clients in the proper loan program. I will be in the business for next 10-20 years, where as the Loan officer at the retail shops will be lucky to last a year!!!
Dec 27th, 2007 at 9:50 pm
Paul I love how you talk in the past tense..”You would check B of A…”
So does that still hold true today?…
Dec 27th, 2007 at 9:54 pm
Paul if the reputation of your industry is SO GREAT..why are most of you being Blacklisted when it come to finding new employment?
Most people surveyed today would NOT go to a mortgage broker because of the bad press…
So, really, how many loans are you actually closing today vs. 1 year ago?(Please do us a favor and not bs us on here instead look in the mirror when you ask the question? You need the answer more than we do.) And how many do you expect to close in 08? Not dead files that can’t go anywhere because the product isn’t available, the client has a bad score or they are underwater…business isn’t business unless it is a closed file.
Dec 27th, 2007 at 9:59 pm
Well paul they certainly will still be around and if you are smart you will go work for them because all those mom and pop shop brokerages wont exist anymore. Its like when the stock market crashed and all those boiler rooms went under. Same thing. The banks always win. You might as well go join them before its too late.
Dec 27th, 2007 at 10:07 pm
Great financial people are invaluable at any price. What this article fails to note is that the liquidity crunch is being caused precisely because there is literally no mechanical difference in the way banks and brokers originate. Banks no longer fund there own paper: period. With negative savings rates where do you think the money would come from? Not from depositors: that is obvious. We are all beholden to the FCBs and giant retirement funds. A broker, at least, is not captive to a static funding model and can migrate rapidly. This reason alone, AGILITY, makes the survival of the broker much more likely than the survival of behemoth banks who have decked the halls with hanging corpses. The independent brokers are an army for hire and as logn as one bank hires them and treats them fairly they will slay the opposition. What I am seeing is that the indescriminate approval of brokers has been tightened quite a bit by the banks who will emerge as the next giants.
I am somewhat unique in that I am a mortgage originator who caters almost entirely to bank employees: loan officers, commercial bankers, actuaries and bank executives. Why do they use me if they can deliver a superior product to themselves? Do you think actuaries would settle for a subpar or inferior deal? If you think so then you don’t know what an actuary is. They use me because I offer superior pricing, service and product: period.
This misaimed article would make you assume its vast wisdom by pointing to the way in which securities brokers have been consumed and rendered moot by the large investment houses. Of course, that never happened either.
Dec 27th, 2007 at 10:14 pm
For all those that want to ridicule Paul, all I can say is you must really stink at what you do. If you are so pathetic that you can’t grind out a living - even today - you must be part of the problem you are defining.
For you, Matty, the Mom and Pop brokers will ALWAYS survive, because they don’t get caught up in the questionable dealings that it sounds like you are used to. Sounds to me like you are on your way out, and you’re trying rationalize your own shortcomings. Just leave - we’ll be fine. Really!
And Ann, sounds like you have your own problems. I can say I won’t close as many loans this year as last, but guess what - I am still making a lgood living. One thing about this business is that there are big cycles - big ups and big downs. If you gear your overhead to your highest level of earnings, well, you get what you deserve and you are probably already out of business. I am just doing fine and it sounds like Paul is too. Sorry I can’t provide your misery with any company.
Dec 27th, 2007 at 10:26 pm
Matt and ANN yes it does hold true, look it up on their web site!!!
You prove you know nothing!!! Bank of America …30 year fixed 450k purchase 20% down,full doc,680 credit. 6.250% 30yr fixed 1,127 points! Everbank wholesale same deal 6.250% ..0 points 1.555ysp to broker!!! 30 day lock and yes I can close that loan in 10 days!!!Look it up!!! Which is better for your client???????? To pay 1.127% points or 0 point deal!
Our rep. sucks that is my point!!!!! Most of the brokers deserver to be blasted. I am no where near being a boiler room operation!!! Like I said…put up a bond, pass areal test, CE credits every 2 years and 1 strike and your gone!!!!!
Thats right most people would not go to broker because of bad press. Only people who took the time to educated themselves for the biggest purchase in thier life would seek out a broker who had their best interest in mind and not their wallets!!!! Smart people would ask there CPA, Attorney or CFP for a refferal!!!!!! Not some lame ass who would give them a option arm with a prepayment !!
Dec 27th, 2007 at 10:27 pm
I think you are correct in your estimation that FDIC “banks” will leave the wholesale scene. I do not however think that that alone will be enough to shut down Mortgage Brokers. Lenders like B of A and Wells Fargo even Chase can leave the wholesale “biz” behind, but others- WAMU and Flagstar for example have huge wholesale divisions with virtually no retail presence with which they can compete on a national level. In fact the volume of wholesale lenders who have ZERO retail capability far outweighs the volume of the “big banks”.
The thing that will kill Mortgage Brokers (and Mortgage Bankers for that matter) is if the “Banks” shut down the warehouse lines that “lenders” use to fund loans. You see it’s the FDIC insured “Depositories” that control the money and as a result hold in their hands the power to kill Mortgage Brokers.
But even then, you still have the banks like Flagstar, ING and others who have no retail presence to speak of (if at all) and the competition for the Brokers loans will be as fierce as ever. In other words ALL sources of warehouse lines would have to dry up and it seems to me, that would take some sort of coordinated effort between all depositories and investment banks alike.
As far as banks getting into the real estate “biz” I think you will find that
1. Banks REALLY don’t want a fiduciary responsibility as the cost of litigation would far outweigh a 6% commission
2. Buyers will not want to enter into a contract to buy without representation from their own Realtor, so the bank saves only three and not six percent.
3. NAR would not like the idea and it wouldn’t be hard to come up with real estate rules and code that would “poison the well” for banks so to speak ( back to fiduciary responsibility and the ensuing litigation)
4. See point #1 and especially #2
All in all, the idea of the Mortgage Broker fading into extinction seems to be very, very unlikely. On the other hand, two years ago I would have also told you that the elimination of Sub-Prime 100% ltv loans would have been unthinkable, as the aftermath of financial destruction that would ensue would shake the very foundations of the American economy. Irony is funny that way.
CTAN
Dec 27th, 2007 at 10:40 pm
Ann
I do not have many if at all dead files!!! I know right off the bat if I can close the loan or if I should close this loan!!!!! If a client comes in with a 600 Fico or lower, I ask my self if this person SHOULD be buying a home or enter into this transaction.I do not take pride in banging the crap of some financial challenged clients… 3-4 points. If you like to do shit loans you will only receive shit loans!!! If you surround yourself with quality people…..honest CPA’S CFP’S and attorney’s you will do very well even in tough times!!
Dec 27th, 2007 at 10:41 pm
Mortgage Brokers: Ancient History in 2008 ?…
The mortgage and real estate industry has resembled a battlefield marred with carnage and destruction with what appears to have no end in sight. 210 imploded lenders and thousands of mortgage, real estate professionals and anything related to these pro…
Dec 27th, 2007 at 10:47 pm
I like how all of you seem to have either the answer or a blame . if you are in the industry then why listen to all the bad news. I actually get a kick out of skimming thru this jargon. few of you if any are probably not even doing any business or quit already. the rest of you should follow quickly, so we real die hards can return the market back to normalcy. options arms with low margins fully indexed right now are still good loans for people who have the ability to manage the risk. maybe we were greedy in maxing out the premiums, maybe there should of been a cap on the ysp. but there wasnt and we maxed them out as often as possible. so do car dealers and boat brokers and everyother business we shop at. maximize profits. free enterprise. maybe we should listen to some of you and change to a socialist gov’t and sell everything one price like saturn. distribute a chicken, one bag of rice and a bag of beans once a month for a family of four like they do in cuba. personally you are mostly full of you know what. cry babys as well. lets clean up this mess one mortgage at a time and let the free enterprise market correct itself. and when the banks still standing get to big let the feds break them back up. sound familiar. dont want to be rude but if you are not part of the solution, do yourself and us diehards a favor and go to work for walmart i heard they are hiring loan officers to sell tires at a fixed salary no matter how many you sell.
Dec 27th, 2007 at 10:47 pm
LJ
I did consult a broker and a realtor. The realtor said, “Now is a good time to sell.” lol. The broker gave me his card and said if I found a property I liked - give him a call. I think the year before he gave up his job as a car salesman to becme a mortgage broker. In fact, I heard the mortgage broker bought several properties between 2004 and 2006, planned on flipping them but is now heading into bankruptcy! As for advice about selling too soon? I bought that property in 1975 for $100,000 and sold it for $400,000 so I have no complaints. Unlike most mortgage brokers, I’m not greedy. Want to know when prices will bottom? Easy. When 100x the average monthly rents in the area are reached. I have been renting since I sold. My rent is $1,800. Rents have risen slightly and are around $2,000 but going no higher. Why. One word. Affordability. People making $25,000 a year cannot afford expensive rents. A fact the mortgage brokers seemed to have left out when talking to the people they sucker punched. However, at the peak, the values for this sfh reached $725,000. They are now at $575,000 and sitting on the market. 100x the average rent means the true (and eventual) value of this house will settle somewhere around $250,000. Maybe $300,000. It’s going to happen and when it does I will go and see my bank manager. NOT a mortgage broker. My 2012 prediction is based on that as more and more people abandon property, inflation bites, stagnation take hold, wages are stuck and unemployment increases. It’s 100% baked into the cake. Want another indicator? Watch the charts of BZH and RYL and DH Horton on a monthly chart. When they start to move on the monthly, wait 3 months and if they are actually moving up as opposed to being in a dead cat bounce, it’s time to look. BUT, this is such a gigantic mess, property prices will take years to increase substantially once the bottom is reached.
Dec 27th, 2007 at 10:53 pm
And for the record I agree with paul on the idea that the rate that a Broker can get a borrower compared to what a “bank” has to offer is…well….there really isnt a comparison. People pay a premium when they do business at their local bank in exchange for a “good felling” that they are not getting screwed.
Lets not forget that the WORST examples of preditory lending have been perpetrated by “Banks” not Brokers. Its companies like Houshold, Ameriquest, Centex, New Century’s retail division, UC Lending, Greentree, Transamerica,Associates, American General, Benificial and others who were “banks” and did not have to disclose YSP getting up to 20 points in some cases (front and back), thats 30K in revenue on a 150K loan boys and girls, I’m sorry Brokers have never done that and its only the “cattle” who would believe otherwise. I’m sorry I really dont understand the logic behind hopeing for the demise of the broker when all it will result in is a serious lack of competition in the market place.
CTAN
Dec 27th, 2007 at 10:57 pm
Competition is a good thing!! Just think what rates and fee’s would be if there were only a hand full banks offering mortgages. Most certianly they would go up!!!!
Dec 27th, 2007 at 10:59 pm
Im not saying your a bad or dishonest broker paul. Im saying that is the way things are turning out. Its not your fault. There are the good and the bad in every industry. It was driven by the greed of young hot shot idiots that have now wiped out another great industry for a period of time that is uncertain. Im hope that you do make it through this. You are an important part of a very important industry. And no Jim, i am actually a CPA. Not only do i like making a lot of money, but more importantly i want stability in my life. I know what im making every month, and every year it grows considerably more.
Dec 27th, 2007 at 10:59 pm
Verdy, verdy interesting!!! Remember Schultz!!
I closed a loan for a bank person. This person has been at a local bank for 5 years now, 4 years when I helped her with her FHA loan. The mortgage person at that same local bank told her she could not get an FHA loan because SHE MADE TOO MUCH MONEY!!!!!!!!! Hmmmmmm1!!
I am the person quoted in the article above the 71 responses.
1) If the “big guys” were so smart about investing - Wall Street - then why are they writing down billions and billions of dollars? Hmmmmmm!!
2) I got out of the stock market and into cash on July 5, 07. and I am still in cash. I was an investment broker in the 80’s, have an MBA with honors and have been investing in the equities markets since I was 16. (My father started it all!)
3) Investors know there is a lot of money to be made in this industry. They will be back and the investors that are still here will stay here for the same reason. Get serious. People will continue to purchase real estate. People will need mortgages to purchase the real estate. A very god marketing system is in place to facilitate the process. The “money guys” know this. The mortgage banking and the mortgage broker industries will not be dismantled. Get on the other side of the table. If you were/are the “money guy”, what would you do?
4) Mortgage brokers will always out do the banks. As was mentioned earlier, they got the guts to go get the business. They don’t just sit there and wait for it. Oh, gee, give me a nice office and a, duh, salary, and pretend I know it all. Not!!!!
5) A past customer (really) came in my office late last week. He needs to refi his investment property, cash out, no escrows, pretty good credit. He decided to have me do his loan. He got a quote from COUNTRYWIDE, duh, at 6.5%. Oh, let’s see $7,000 in closing costs. For those bankers who don’t know the difference, this doesn’t include ESCROWS. I am charging him 1 point plus normal (real!!!) closing costs. Total cost to him - way less than 1/2 of COUNTRYWIDE’S quote. Oh, he knows I TELL THE TRUTH AND SHOWED HIM THE GFE! For those bankers who don’t know what that is, it is a Good Faith Estimate. Hmmm!!
6) Doing good, honest business pays. And, according to the numbers mentioned above, 60% of the mortgage community will still be here.
7) My office had a great November and December. Best in the past five years! (Gee, I keep records!) We anticipate January to be really good. Oh, I am FHA approved and have been for many years. Guess what we have coming. If ya think you’re gonna get approved FHA and close a lot of FHA loans, WRONG!! I promise I won’t tell those who don’t know the secret. (Do ya know what FHA loan doesn’t have mip?)
Point made. They really don’t know what they’re doin!!! How in H… can a mortgage person tell a same bank employee she can not get an FHA loan because she makes too much money??????????????????? And this is my competition???????????!!!!!!!!!!!!!!!
9) Last week 8 people were sentenced after a 4 year FBI investigation. This is in a nearby relatively large town. Believe me, they’re goin after the “bad guys” and they’re getin ‘em.
(Enjoy the early English!)
10) As John Wayne would say “Well, Pilgrim”!!
11) There is a big market developing out there. All ya good guys, hang in there. This country needs you. The bad guys are gettin out ’cause there ain’t big bucks in it any more. That’s ok. There is a good, honest living in it and that’s why I’m a stayin’. If it ends, so be it.
12) I told my kids as they were growin’ up, “ya gotta stick together-help each other”. It’s like the pioneers headin’ West. When the Injuns were comin’ over the ridge, “Farm a circle the wagons”. So what is different today? Nothing! So all you positive, creative, energetic, hard workin’ loan officers, stick together. The fight has just begun. Our ancestors got through the Great Depression and we will get thru this. Remember the best way out of trouble is through it. Hmmmmm!!! (A former President of the United States went to England, smoked pot and got out of the draft!!!) Hmmmmmmmm!!!! Guess who’s runnin’ for President now!!!!!!!! By the way, I served in the UNITED STATES AIR FORCE for 4 years! And I was stationed in Pakistan!!!!! Hmmmmmmmm!!!
13) Summary - I hope this gets the blood runnin’. I hope this gives hope to a bunch of the “good guys”. I hope this pisses off a bunch of the “other guys”.
Dec 27th, 2007 at 11:08 pm
Matty
Thank you, I will make it!! You said you are a CPA and I am sure you would not put your license on the line for a client just to make a few extra bucks. I want all broker, bankers and LO to be held to a high standard, testing, education and subject to stiff fines! I receive many loans from CPA’S because I do what is right!!! Not only do I have my reputation on the line but also the CPA. yOU DO NOT BITE THE HAND THAT FEEDS YOU!
Dec 27th, 2007 at 11:18 pm
Broker or Banker, which is worse? Neither. Fraud can take place any where, at any time, by Broker or Banker. In Washington, I was a Broker for 9 years, but switched to a Bank job to weather the storm. As a WA Broker, you have to get a Loan Originator license. Working for a Bank, no license required. I think to make it fair, all Loan Officers need to be Federally Licensed and Bonded. Finger printed, thorough back ground check, the whole nine yards. Also, 20-30 hours/year of Continuing Ed should be required to originate any type of mortgage. Rebate/Overage should be limited to .25 - .50% to the L.O., the rest to the borrower.
To make additional income for an L.O., you get a “Residual Income” for a perfectly performing mortgage. This forces Loan Officers to orignate good, fair loans. When the loan pays well, the LO gets a bonus each year. Plus this would keep LO’s in touch with their clients to make sure the are paying on time, or if another sales opportunity is there due to changes for the borrower. This could be a win/win.
Dec 27th, 2007 at 11:27 pm
exactly what I was talking about. great answer mark. for you walmart has an executive position in the the shoe dept.
Dec 27th, 2007 at 11:29 pm
You brokers kill me. You make it sound like you are truly helping people. What a crock of crap. Would you help a dope addict obtain his dope at any cost? FBs and speculators all overstretched their true buying capacity. When you have people making 25k to 50k buying 500k and 600k homes you are not helping them. There is no subprime loan on earth that these people should qualify for. Just because it exists doesnt mean you throw your client to the sharks. Not just a few places were doing this almost every brokerage whore house was is on this.
No, I dont have sympathy for any brokers. Sure there were hard working honest people but if they were out buying themselves 600k houses and mercedes and not saving then they deserve what they are getting now. This isnt going to get any better for them in the next year, year after or the year after that. Look at telecom, many of the people making huge amounts of money no longer exist. There are some but the industry as a whole has changed nearly 8 years later and the people that are left are making less.
Dec 27th, 2007 at 11:29 pm
oh i forgot your bag of rice and beans
Dec 27th, 2007 at 11:29 pm
Mark:
You quit. You left the mortgage brokerage business!! And now you give instruction as to regulation!! What’s wrong with you? Mortgage brokers work on commission. And from your non-broker positon you hand down income/revenue restrictios!! Oh well!! Russia, here we come!!!!!
Dec 27th, 2007 at 11:31 pm
The wholesale lenders created the products.
The brokers sold them.
The customers bought them.
The lenders packaged the loans.
They sold them to investors.
Too many homes were built.
The cost of housing got too high.
Housing crashed.
Lenders crashed.
Brokers crashed.
People are crashing.
The economy is crashing.
The world is crashing.
The party is over.
Time to get real.
Time to adjust.
Time to pray.
Time to spend more time with family and friends.
Time for new hope.
Time to be happy we are still alive.
Time to love.
Time to forgive.
Time to move on.
Time to survive! And we will.
Dec 27th, 2007 at 11:33 pm
Carpenter:
So brokers make 10% commission? In talking with wholesale reps I hear 2-3% is max. Where in the h… are you gettin’ your info?
Dec 27th, 2007 at 11:35 pm
Well said, Jariah
Dec 27th, 2007 at 11:40 pm
Joe, Really!!! Broker’s work on commission? How do you think LO’s at banks get paid? Maybe…..commission!!! In some other countries, LO’s get paid for the life of the loan. Not here. We want it all up front. Which is fine, when no one is complaining. No they are. So let’s get paid some other way. Like earning it.
Dec 27th, 2007 at 11:41 pm
Carpenter:
You have more than bathroom time to respond. Apparently you “Got no facts”!!!
Dec 27th, 2007 at 11:44 pm
mark you are an easy target. you are a broker working for a bank to wait out the storm. why not put your balls on the line like us diehards instead of hiding behind a bank?
Dec 27th, 2007 at 11:45 pm