Mar 8th

2010

Will Mortgage Brokers Become Extinct?

During the 70’s and early 80’s, banks dominated originations by carving out a whopping 80% of the retail loan applications. Brokers quickly picked up the slack and by the early 90’s the numbers reversed. The market, especially real estate investors, liked the idea of a personal mortgage broker who understood their goals scouring the landscape for the best products and rates.

Big banks have never been known for the best customer service or loan pricing, and the public punished them by fleeing to the broker community. During this time brokers enjoyed about 75% of all originations, leaving small pickings for the banks. Enter deregulation and the subprime loan.

We are all aware that our current economy was caused in large part by the collapse of the subprime mortgage market in late 2006. From then until present day, there has been a littany of finger pointing by people on all sides about who is to blame for this mess. Unfortunately, you and our other fellow mortgage professionals have received a big part of the blame. Even big banks like Citi and Chase have pulled out of the mortgage broker market all together to separate themselves from the negativity swirling in the media.

Add to that the fact that many of the top mortgage insurance companies have restricted the use of third party originators and it begs the question, does this mark the end for mortgage brokers?

Maybe not.

Mortgage brokers who transition into mortgage bankers will survive. Mortgage bankers that can offer warehouse lines of credit, in-house underwriting, closing and funding, top-notch compliance, auditing, and access to training will be able to weather the storm. Even better are mortgage bankers that can still offer the traditional mortgage broker channel and have the best of both worlds. We predict the best of the best will survive. Loan officers will have to learn to adapt or leave the market; most from the subprime era have a history of 25 slam dunk stated income loans per month and now need to adjust to 2 or 3 FHA deals per month.

If you are a mortgage broker or loan officer we encourage you to seek a mortgage branch opportunity with Southwest Funding. If you are passionate about continuing to originate mortgage loans, now is the time to make the change.