FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware

Jeff

Hallelujah!!! I too began to write an article about this same topic as a direct result of what I read in that very blog. Maybe I will free up some time this evening to finish that article up.

Like you, I have close to 22 years in finance, although only about 10 in residential mortgage.

I've seen and heard it all, but some of the opinions out there right now are downright comical.

Jeff - If Mortgage Brokers are truly squeezed out of the equation, I believe that is going to translate to a more expensive transaction for the consumer.  There is a place (a quite substantial one) for Mortgage Brokers in this business.  I've always maintained that I desired to have the best of both worlds at my fingertips as a Mortgage Guy and to a certain extent... now I do.  The "Risk" you mention is a valid point in my view but remember, a lot of wholesale lenders had "buy back" clauses... and in my view they all should have done that from the get-go.  Broker, Banker, Correspondent, Depository Lender, or The Japanese Bank of Godzilla's Younger Nephew, true competence had/has lacked in our industry.  I just don't believe in eliminating competition, it's bad for the consumer.

This comes yours truly, eight years in the mortgage business and thirty-two years of pure opinion:)

...

I'm back.  I know you aren't advocating that Mortgage Brokers are being squeezed out, just highlighting more of the real reasons this may and probably is happening.  In this Industry, this topic is a hot one.  For consumers, they just want quality information... that's it.  It's akin to politics, the speech versus the performance.   We should strive first for the latter and hope to be able to pull off the former to get their attention in the first place.  The facts versus the attention.  Which do they/you/me/we truly want?

 

TO EVERYONE READING THIS : .... I am not looking for Mortgage Brokers to become obsolete or for them to be forced out of existence. But here is a hard core fact, even banks and mortgage bankers are being held to the same credit scores. As mentioned, these loans need to be sold to investors on Wall Street.

Again....  it's all about truthful information, and to make sure that people have a handle on the difference or similarities between both bankers and brokers. And not from a person that is looking to get a feature because it just sounds good. That is why they have different books and publications that are called fact and fiction. Anyone can make fiction sound like fact.  Just my .02 on this and anything written for the public.

 

 

BILL.... .  I actually had this at 1,700 words and I had to cut a lot out, just to get it down to 1,150 words. I am just getting tired of opinions that sound like fact, yet when it just sounds good, yet there is no thinking behind it. If you are talking to the public that doesn't know any better, it's very easy to think that previous blog was all truth and 110% correct, right on the money. But the author contradicts them self. A great example of this is blaming the credit scores on being raised. Huh?  Even internally, the banks have raised the credit scores for their retail branches also. This person just shows me that they don't fully understand the mortgage process and behind the scenes, yet they are a great writer, and people will believe what they read, especially when it sounds good.

Please come back and put the link to your blog when done.  We need more people to truly understand this and not just assume because they read it. thanks

 

JASON.... . I believe that also....    but then again, they can just go work for a mortgage banker or a bank. If they believe in the same thing as they did as a broker, then why would it matter. What I do see are more brokers charging more broker fees. So your statement can be argued from both sides of the fence. Yes, knocking out the brokers could drive up price, that is just a perception based on how other businesses work.

I will stick to this statement... but even if you lose brokers, and don't lose mortgage bankers that still sell to banks, it won't throw the pricing of as you mentioned. I believe that competition won't be fully eliminated unless your lose the mortgage bankers also.... yes, if it's just banks and only banks, then I can see your logic and I would agree. But losing just brokers won't be the end to all. 

Overall, I just believe in fair opinion and not opinion that is one-sided because they don't know any better or because their agenda is to get more readership or more features. Sorry if I sound harsh, I just don't think this person and many others, fully understand the mortgage business, from all aspects of doing business. Sometimes it takes just more than years of service to realize this. thanks for your feedback.

 

JASON # 2...... . well, that's good to know.  ;o)  Seriously, we agree on the fact that you need both sides to keep competition reasonable. But in my opinion, banks are protecting their assets, hence the reason why they are tougher on brokers now. RISK....

In regards to your comment....  yes, we need to watch what we say and it should be quality information, not information that just sounds good, that is quality writing, yet is lopsided or one-sided. Some people are very good at making opinion sound very factual, and that crap irks me to no end. And if it's from other sources such as the talk around the water cooler, that to can be one-sided. hence why I actually interviewed both brokers and bankers, and most talked about risk.

 

Jeff - great topic. An issue every mortgage banker and mortgage broker thinks about everyday.

The REALITY of it is bankers and brokers both have major issues to contend with right now.

Brokers are getting squeezed out of the market. Regardless of the true cause or causes, lenders apparently want more skin in the game. They get this from mortgage bankers. Brokers close the deal and it now belongs to the bank - the brokers hands are washed..... The rules keep changing for brokers and many lenders are terminating brokers for reasons such as not enough volume. And.. many lenders are just exiting from wholesale completely.

Bankers have their own set of issues to deal with. A mortgage banker operates and funds loans from a warehouse line of credit. When a loan is closed, mortgage bankers draw on their warehouse line to fund the loan. The loan goes through post closing and is packaged, ready to be sold to a lender. The liquidity problems you hear of in the news can be directed to the mortgage banker at this point. Lenders are not buying loans as quickly as they used to. I have heard of instances where a certain investor who buys loans in 3 - 5 days now takes 3 - 5 weeks.....   Warehouse lines of credit have a max credit limit, just like any other line. As lenders take longer and longer to purchase closed loans, mortgage bankers warehouse lines of credit get maxxed out and they for the most part are shut down.

I too have been a banker and a broker. If we continue on this path, I am not certain if banker or broker will outlast themselves. This industry changes EVERY day. My favorite bankers are all but shut down because they can't free up their warehouse lines fast enough. More brokers than I care to add up are gone from the industry.

If bankers / brokers become a thing of the past .. well this could mean consumers will have less choice and rates could be controlled by the few banks remaining... or would that be the federal government who owns these banks?

Maybe this should be titled  Banker? Broker? Bank?  

Jeff, You explained this very clear. I also have worked for both mortgage broker and mortgage bank, and the truth is your great explanation on risk. Brokers are not being treated any worse, they just expose themselves to bigger risks for the banks.

Sorry in advance in momentarily hijacking this piece...

"Some people are very good at making opinion sound very factual, and that crap irks me to no end."

Did you know Jimmy Hoffa was actually abducted by atheists living on the Planet Droon, guarded closely by their leader... Professor Habib Smith?  His (The Kind Professor) initial intentions weren't to excite folks or perpetuate a conspiracy that would live and breath years later; Professor Smith just needed a small skin graph to be able to figure out the square root of Oprah Winfrey's current body fat percentage.  He was a visionary, of sorts. 

Hindsight is indeed twenty-twenty, as it backfired and then some.  The Kind Professor was found out while touring a local pub, hiked up on shots of Wild Turkey.  Habib fell prey to the proverbial "Freudian Slip" and was stalked incessantly by the ACLU before turning himself in at the annual Church Dinner of Pious Pricks.

Professor Habib Smith died under a rigorous torture structure in which the Main Event included listening to love songs from the 80's and having to give a much younger Barney Frank a pedicure while writing summaries of local Roller Derby Events.  They never got out of Habib where Hoffa was, but they found Jimmy's killer long ago.  Bet you didn't know that.  That's a fact.

Regards,

Making this crap up on the go

 

 

LEWIS.... some good points, but you are dealing with some bankers that are the middle man. With most of our investors, our loans are being bought in less than 15 days still. Yes, we had an investor or two over the summer that were like 30 to 40 days, but we stopped doing business with them. They both just had poor back-end office support. Since then, we have gone back to one of them and not instead of 45 days, they are down to 15 days also. From talking to you, the people that you are using, are still selling the loans to someone else. So you have an extra body in there. And maybe they just aren't set up for handling this work load. Or, maybe that is their excuse to you....???  I am saying this because I don't believe to many excuses from other lenders unless I am at the front of the situation.  You are relying on your source to be upfront with you, but I hear so many excuses that are lies, just so they don't look bad.

I don't think we will lose the mortgage banker, because they like to use companies such as ours, to offset the risk. If the banks just controlled this all by themselves, business would drop off completely. I can get more things done and bought than some of the same people that we sell to. If we take the upfront risk, but it still looks good, this is not a bad thing for the bank either. So as much as I can see your point, I don't think mortgage bankers are as bad off as the mortgage broker or would go instinct. And if they did, in my opinion, people won't be able to buy homes or refinance as much as they can now. Think it's bad now?  Less competition or not, volume will be down considerably and we'll all be in trouble.

 

 

GARY... . thanks for the kind words. Yes, it basically does come down to risk. But for some reason, this was left out of the other blog. But the author made every excuse seem very real and only against brokers. And I can keep pointing back to the credit score comment. This same person forgot to mention that even the banks themselves have imposed credit score restrictions on their own people.

JASON.... .  hijacking one of my posts?  lol  Hey, that was some funny stuff in any case.  thanks for the laugh that was factual, with a hilarious twist to reality.

 

As you and I talked about this very issue the other day, I am here to make my feelings (yes - feelings, not facts) known again because I somehow feel that I missed the mark in our discussion. Either that or you are just uber stuborn!!

I find equal validity in writing about professional opinion as I do about writing about just the facts. I call it perspective. We can interview the most noted economists, all of whom work with the same 'facts', and we will hear markedly differing views on how those facts actually play out in real life. This is why I don't think it's completely fair to come down hard on a writer with an opinion. Especially a writer who otherwise does a terrific job articulating information in a way that the average Jane can easily understand. It is still doing a service if you have the power to get through to your audience. Even if the information is tied to their locality or limited to their particular experiences.

As a Realtor, I often read posts here that I find very hard to believe. When these posts are couched as fact, I have to remind myself to step back and ask whether it's possible the market operates under different forces in that writers locale, thus flying in the face of what I know to be true where I am. Sometimes my friend, sometimes.

Just my .02 worth :-)

 

p.s. Everything Jason says is 100% TRUE!!!!

 

JENNIFER.....  very well said. "perspective"... and I don't have a problem with ones perspective or opinion, I love a good debate. But back it up with fact and or surveys and not based on what you alone think. And most of all, without putting the words fact or opinion or perspective in the blog or any writing, just allows the reader to assume that it's all true and factual. That's the problem that I have with it.

Now, one of the main differences with this post and the one that I am talking about is that we had two types of professionals chime in. In the post that I am referencing about, most of the comments that thanked the author for good information and commented that it was good were realtors for the most part. Even though I have a few comments, my post has mostly loan officers and the majority seem to agree with my topic of discussion that was failed to be mentioned in the other post... Risk.  And another thing, the credit score issues. To me, that is misinforming the general public and the real estate community.

In regards to people will have different takes and different sides. Again, I agree. We have this amongst professionals often, especially on the news. But when those that could be wrong, but don't care to define the topic, yet they write for the public and to the public... just so they can get noticed amongst their peers, again, is misinformation. And I would bet that many of these same people are just good at talking and or writing, but aren't as good at their profession. They are usually linked as professionals in their field because they are telling people what the media wants to be published. Same on here...  unless you had people in the mortgage business reading mortgage related blogs, all you are going to have is one outsider reading another professionals post, view, and giving it two thumbs up, when it might not be true or truly worthy.

But you hit the nail on the head when you said this...  "I often read posts here that I find very hard to believe. When these posts are couched as fact, I have to remind myself to step back and ask whether it's possible the market operates under different forces in that writers locale, thus flying in the face of what I know to be true where I am."   Your .02 is always appreciated. thanks

 

Jeff- You write great factual posts about the mortgage business as well as great consumer content. I am glad to have connected with you.

Jeff, you just wrote everything I've been thinking about writing in light of PMI and Chase kicking brokers in the butt.  I work for a long time family owned correspondent lender...but who knows who's next for a huge kick in the gut?

IMO it will come down to who had the most lobby dollars.  Banks will beat out the small family owned companies every time.

We need to start a consumer campaign to contact their elected officials to support their mortgage originator. 

 

KATERINA..... . thank you very much for those kind words. Opinion can be factual if you back it up with proof or surveys, etc etc... but to just put stuff out there and to never claim that is was opinion, makes me sick.  And I am glad that we have gotten together.  thanks again for the opportunity.

 

RHONDA.... . is that the case of great minds thinking a like?  ;o)   Sure, because of the mess that we are in, banks could be made the kings of the US, because of the gov't intervening. But I don't see mortgage bankers going away at least, because banks don't want to take all of the risk upfront. In regards to brokers?  That's hard to say. Can I agree that they could become instinct?  Yes, very much so. But under the false pretenses of the previous author, who gave those exact answers above, to as why banks are forcing out brokers...  is so false and misleading. Especially of the comment stating that banks are raising rates on brokers. Maybe that loan officer working for that broker should look at other broker's rates sheets, because their company is charging more in the rate themselves. This also happens....  but the comment in itself is very misleading and false in my opinion.

As I mentioned, yes, rates can vary from investor to investor. I have many friends that are brokers and their rates are just about the same as mine. Sometimes even a 1/4 of point better. So aagin, how can this person make this statement.

 

Jeff, You have a bit of a logic gap. Risk explains why banks and mortgage bankers make more money than mortgage brokers. However, it doesn't explain why banks are cutting out mortgage brokers. You, also, did not provide any "facts" to explain that reality. The truth is I don't believe there are any "facts" that explain it. Banks have provided reasons, but many of them don't hold up to careful scrutiny. I don't believe in conspiracy theories, but the reality is that the broker model has worked for many wholesale lenders for many years. The fact that some lenders are citing "the model doesn't work" as a reason for terminating wholesale operations sounds fishy. Also, it really sounds arrogant to ask "why don't you want to become a banker." Jeff, there are a lot of us who enjoy being small businesspersons. Many barriers, mostly financial, have been created in the industry to prevent the transition from broker to banker. Frankly, I would like to be a mortgage banker because I KNOW the money is better. (And, yes, the risk is greater.) I have systems and processes in place in my business that I suspect would put most mortgage bankers to shame. So, it's not about inexperience and inability. It's simply that I don't have the financial resources to climb that hill. Take care, Steve

 

STEVE....  . you stated, "Risk explains why banks and mortgage bankers make more money than mortgage brokers."

Can you back this up?  Could you explain this sentence in more detail?  Or is this just myth, just as the myth that all mortgage brokers aren't trustworthy?  Do you know that it costs a lot more to be a mortgage banker?  More audits, higher fees, higher insurance, the cost of underwriters and closers? Sure, Banks have the ability to make more money.

Overall, curious, because in most of your comment, you talk about mortgage bankers making more money. But that wasn't the gist of my blog post. Please read it again. This has to do with a specific loan officer that works as a broker that wrote a post that stated that banks are trying to get rid of brokers. And then this person sited like 5 reasons to why. Please read these reasons again. The two that stick out the most are :

• raise credit scores
• raise rates

I find these two statements alone, very false and misleading. And I just spoke with another broker that owns his own shop and agreed with me. The credit scores were raised across the board, not just for brokers, but for mortgage bankers and for banks.

In regards to raising the rates?  The rates are the same for the most part, across the board. Yes, some investors are better than others, but it's all the same for both bankers and brokers. And the author never even gave any clarification to this, which makes the statement even worse.

Overall, I am still trying to understand your reasoning for making statements that bankers make more money?  There is more risk and more cost, that will usually play itself to a break even point. Sure, they can make a tad more on the back end, as a company, but not as a loan officer. Sure, a banker doesn't have to disclose YSP....  but my YSP is the same in most cases as a brokers. So it's not more money. Besides, again, that is not what this post was about. Please read the middle of this blog again. Thanks for your comment.

 

I wish people would actually read the posts before commenting as it only shows their ignorance.  Then again, maybe they are like congress and just are trying to push their "agenda". 

First off, I have been in the business for only 6 years, all as a mortgage broker, owner of my own shop for 5 of those 6 years.  I have my opinions, and I have a great understanding of how businesses work.  the bottom line (IMO) is mortgage brokers will only become extinct if they allow it to happen.  Banks and lenders will do things to minimize their abilities, such as closing down their wholesale divisions or placing extra burdens somehow, even by lobbying congress to overly regulate them. 

Why?  Let's face it, in our current economic crisis, the golden rule applies, that being he who has the gold, rules.  On top of that, why wouldn't banks and lenders want to minimize competition?  If they can successfully do so, they can increase their own profits and since they all are sucking wind right now, any extra revenues they can generate is that much more breathing room.

Maybe I will do my own opinionated blog on the subject since everyone seems to like the topic and the need to ensure opinion is separated from fact is essential.  From the way I see it, aka my own opinion, mortgage brokers will not become extinct, but they will face heavy burdens from one source or another in order to drive many out of business, reduce competition, and ultimately increase profits for those that do remain, even the mortgage brokers that get through this.

Oh, I forgot to state I agree with your posts about the need to separate fact from opinion as you have shown. 

Many people, not just mortgage brokers, will seemingly overstate facts or distort them somehow to defend their opinions.  You hit on two of the bloggers statements (that banks are raising rates and credit scores solely for mortgage brokers) that did just that and readers, especially consumers, need to know the facts.  I got off on a tangent above and omitted my own reasons for commenting in the first place, sorry. 

Hopefully my point above adds to the factual side of expressing opinions.

Jeff,

Enter me. late as usual! :)  This has been a good exchange with some excellent views or perspectives. Almost like dissecting the frog in 9th grade biology class by the numbers.  I must admit that I am familiar with the post that inspired this follow-on and that my initial speed read did not detect the points you are making. A revisit/interpretation did, in fact, reveal that the author's opinion/ purported facts were misleading. I'm by no means saying this was intentional but they certainly should have better qualified or stated. These things are in fact occurring but not across the board and strictly targeting just the mortgage broker.

Financial services in every sector are "re-inventing" themselves to survive or be able to survive based on what is/will be developing.  There has in fact been a large exodus from wholesale and there will be much more before the dust settles.  Business models are being changed and tweaked daily.  I believe that much of the exiting of wholesale is a financial necessity based on portfolio performance, profit margins, access overhead, foreclosure losses, delinquency trends. So many things!  It may be a survival issue that dictates the need for re-capitalization, projected losses vs. new bucks out the door vs. Recover what is out there presently on the books. Buybacks from fraud??

We are in fact navigating unprecedented times!

Question...anyone? How come some of our "mugshots" are appearing with our comment?  Are we "wanted" for something. :)  Why not others?

Brokers are marketers. They spend hundreds if not thousands of dollars attractin each client to complete an application. They don't assume as much liability but they DO have liability especially if they received any YSP on the transaction. Trust me, I've paid enough of it back for early pay-offs. Brokers also have liability through other fiduciary responsibility to make the lender whole in the event of fraud and that is not limited to fraud perpetrated in the broker's office and it is not limited to just the broker's portion of the compensation. Banks are definitely squeezing brokers out but not for the reasons enumerated in your counter-author's blog. THEY WANT CONTROL of the deal, period. They are forgetting the thousands of denied files they never see and the cost of originating those - well, they'll soon remember them and someone in Operations with half a brain will say, "I told you morons this method would cost us millions and millions of dollars but no, you had to 'mitigate loss' and do away with the best free marketing program we ever had."

In my opinion, being a mortgage banker, the lenders who continue to fund on TPO paper will be the giants in the industry and the others will be thumbsuckers. Yes, there are morons in the mortgage industry. There are also morons as highly powerful elected officials, police officers, airline pilots, nuclear engineers and athletes. Ken is not happy about the direction of the market and intends to accept all the private funds he can find to continue funding loans and making the funders wealthy in the process.

"Effective Friday February 20th, 2009 PMI has announced they will no longer place mortgage insurance on Third Party Originated (Wholesale [brokered]) loans. All new submissions for PMI, must be reviewed and a MI certificate ordered by Thursday, February 19th, in order to be an eligible loan for PMI. Customers with loans that are currently approved by PMI will not be affected by this change and should continue to submit outstanding conditions on these loans as normal. Flagstar will have a PMI representative on site after Friday, February 20 to review these conditions."

Guess what? Pass-through mortgage bankers who do not hold and service their own paper are next. I had a very interesting meeting with some high powered bankers last week who assure me correspondents are going to be receiving exactly the same treatment as brokers. I have no reason to doubt them. My objective is to stay small, service my own paper and build my own portfolio.

Ken -  you are exactly right. That is what I am hearing as well. In addition to liquidity issues. TPO is TPO.  If your not a CW or Wells or Citi you are not a lender........ you may be a "super broker " but your not a "lender"    most wind up with those guys anyway........

This crisis seems to be gaining momentum every day   620 minumum on all loans very soon   680 for cash out   what the hell???????????

Obama is supposed to roll out a mortgage plan Weds - if those 620 minimums don't go away the plan will be worthless................

The only person who consistently puts out their own half-baked opinions as fact is YOU!

I've got just one thing to say on this:  not ALL mortgage bankers are the angels they claim to be and not ALL mortgage brokers are the devils that mortgage bankers and the media make them out to be. 

Here's an interesting little tidbit (based on personal experience) that ought to support my statement:

I did a stint working for American Home Mortgage working in their direct-to-consumer division.  Some of the calls we got consisted of portfolio defense overflow.  The majority of these calls (a good 90%) consisted of borrowers seeking to refinance their option arms.  Of those, every single one of them was originated as a reduced documentation loan.  After my conversations with those borrowers, I would compare what they told me with the information in UniFi.  The results of those comparisons were jaw-droppers:  incomes overstated by factors of anywhere from 1.5 to 6 -- that's right 6.  

Now for the juicy part:  of those loans, a good seventy to eighty percent of those came through the CORRESPONDENT channel.  On top of that, there was not one that I saw which paid SRP of less than 350 basis points.  The typical range was 400 to 500 basis points.  In one particularly galling case I saw a fellow in California who paid $25,000 for his rate and term refi (indirectly, through SRP) on a $500K loan.  Of course, he didn't even know since SRP is not disclosed.  Does that suggest, perhaps, that there's a need to extend the transparency of broker compensation to correspondents and their SRP?

In any event, I don't bring this up because I have an axe to grind..... nor is it my intention to paint one or another segment of the industry with a broad brush.  Nonetheless, I do feel strongly that the broker-banker dialogue needs some sunshine shed upon it.  

 

 

ROBERT.... . I totally agree with you 110%...  know wonder we are in such dire straights in recent years. And let me know when you write that blog.

ROBERT.... .  hey, you are back. And yes, those two things mentioned definitely hit a spot. To say that banks are raising credit scores and raising rates on brokers is sad information indeed. This person never clarified that the banks have raised their credit scores also. They are trying to minimize risk all around. Those with lower credits have proven that they don't pay on time as much.  thanks

RON.... . Thanks for clarifying that. I never said that this author did state those facts on purpose. But I will say this, if they truly believe those statements, then it scares me even more. You kind of have to think how they talk to their clients also. And you hit the nail on the head, portfolio performance is huge.  Hence why so many banks are struggling, because of the poor performances of those loans.  thanks

RON.... . Ah, back for 25 more points?  lol  Those mug shots are explained in a post written by Brad Andersohn.

KEN..... . yes, brokers do assume responsibility when they receive YSP, but that's about it. As I mentioned, they receive little risk/responsibility.  And I agree, banks are squeezing brokers out, but not based on their statements. Hence why it irritated me and why I wrote this post. Overall, you make some excellent points and thanks for sharing them.

LEWIS.... .   you make an excellent point on the cash-outs.  Even if many lenders are going to 620, at least you can still do a FHA cash-out to 620, even to 600.  thanks

UNKNOWN childish comment...... .  it's obvious that you are on Active Rain and I have a pretty good idea who you are.  Just sad that if you believe in what you stated, that you can't show your face. WHy is that?  PS>..  my half baked opinions as fact?  Can you share a few with me?  If it's my opinion, I usually state that, so I am not sure how it can be as fact then.

JUAN...... .  interesting, because I didn't really see my blog slamming mortgage brokers. I was merely talking about someone that wrote a blog that in my opinion, was very misleading with what they wrote and the answers that they gave. And I will agree, that dishonesty and so many other things took place on both sides of the fence.   Just wondering what you actually though of my post instead.

 

LOL....

Jeff, if you didn't have jealous trolls following you around then you would then need to worry.

 

Hahaha - jealous trolls. Do they have those on the shelf at Krispy Kreme?