Right now is both the best time and the worst time to be an independent lender in the mortgage industry. On the June 15 episode of the Lykken on Lending podcast I host, I discussed with Glen Corso of the Community Mortgage Lenders of America the good and the bad in the industry for independents. First, the good part is that—due to the crackdown on larger banks—a more level playing field has been created so that independent lenders can also compete in the market. But community lenders are also facing some difficulties right now ...
First, the same crackdown that is faced by the larger banks is being applied—though perhaps to a lesser extent—to small independent organizations. It came as no surprise to me to hear that those independent lenders surveyed by Glen reported a 300 percent increase in spending on compliance personnel between 2010-2014. Spending on compliance has come to equal—and in some cases exceed—spending on technology and marketing. The risk of not being found in compliance has come to justify almost any expense.
Another reason independent lenders are struggling, though, has to do with the compliance effects on the consumer. The lenders surveyed by Glen reported a six percent decline in smaller balance loans (loans less than $100 thousand). Post-financial crisis, it seems that the low end of the market is being increasingly shut out. First-time homebuyers and other lower middle class borrowers who can afford mortgages aren't being given the opportunity due to the regulatory environment. As a large portion of independent mortgage business comes from this category, it has been hard for them to survive while losing so many potential customers.
David Lykken is 40-year mortgage industry veteran who has been an owner operator in three mortgage banking companies and a software company. As a former business owner/operator, today David loves helping C-Level executives and business owners achieve extraordinary results via consulting, coaching and communications, with the objective of eliminating corporate dysfunction, establishing and communicating a clear corporate strategy while focusing on process improvement and operational efficiencies resulting in increased profitability. David has been a regular contributor on CNBC and Fox Business News and currently hosts a successful weekly radio program, “Lykken on Lending,” that is heard each Monday at noon (Central Standard Time) by thousands of mortgage professionals. He produces a daily one-minute video called “Today’s Mortgage Minute” that appears on hundreds of television, radio and newspaper Web sites across America. He may be reached by phone at (512) 501-2810 or by e-mail at [email protected].