Right about now is the time when folks in the industry stop to reflect on the year gone by and make their predictions for the coming year. Given that the Mortgage Bankers Association (MBA) Annual Convention & Expo falls just before this time each year, it’s not surprising that the reviews and forecasts reflect the mood of conference attendees. At the 2008 show in San Francisco, the mood was bleak, if not suicidal! At least half, if not two-thirds, of the industry was wiped out and protestors were literally knocking at the door. Relief was the prevailing emotion at the 2009 San Diego show—relief to still be in business, relief that blame for the financial crisis was shifting towards Wall Street, relief that people actually showed up to the conference.
Prior to last month’s MBA Annual Convention & Expo in Atlanta, I’m not quite sure what my prediction for 2011 would have been. This was the year of the regulator, with the changes to the Real Estate Settlement Procedures Act (RESPA) going into effect the beginning of the year, the Dodd-Frank Act passing a mere two months before the show in October and Washington, D.C. showing no signs of slowing down the winds of financial reform. With the Federal Reserve Bank’s changes to yield spread premium (YSP) compensation going into effect in the second quarter of 2011, Bank of America’s announced exit from wholesale, and early predictions by analysts that interest rates will rise, one would assume that the mood at this year’s show would be anything but optimistic.
However, after spending two solid days on the exhibit hall floor talking with lenders and vendors alike, I can say, with a reasonable measure of certainty, that 2011 is going to be a good year for the mortgage industry. Folks are encouraged by the growth the industry has experienced over the year, and they see the potential for the industry to come back perhaps stronger than ever.
In regards to wholesale, there is every reason to believe that this channel is going to come back in a big way over the next 18-24 months. I spoke with multiple lenders who expressed a desire to either start up a wholesale division at their institution, or to revive their now-defunct wholesale operations. And why shouldn’t they? It’s no secret within the industry that brokers are, by far, the least expensive way to originate loans, and although the industry is expected to rebound even more, the need to hold down costs, especially in light of the increased cost of regulatory compliance, will remain a top priority for lenders across the board. Additionally, the regulations put in place to police brokers in a way that hadn’t been done during the mortgage bubble and the technology now available to lenders to proactively manage their brokers has made the wholesale channel perhaps the safest origination method available.
Bank of America’s announcement that it was shuttering its wholesale division threw lots of folks in a tizzy about the effect this would have on the resurgence of wholesale. What’s interesting is not one person even mentioned the announcement to me during the show. The truth is Bank of America’s exit from the channel actually opens the doors for both new and more active players to gain market share and fuel the growth of the channel.
Given the exciting prospects for wholesale growth over the next two years, it’s more important than ever for brokers to adopt the policies and procedures necessary to demonstrate their status as true Trusted Mortgage Professionals and gain their fair share of the business that is to come.
Greg Schroeder is president of Comergence Compliance Monitoring. To learn more about how the Comergence Compliance Trusted Mortgage Professional program can help, call (714) 495-4720.