OTS Opines That Federally-Chartered Thrifts and Their Operating Subsidiaries are Exempt From Georgia and New York High-Cost Loan Laws

OTS Opines That Federally-Chartered Thrifts and Their Operating Subsidiaries are Exempt From Georgia and New York High-Cost Loan Laws

May 31, 2004

Enduring the Winds of ChangeAnthony O. KellumRESPA reform, market changes, paradigm shift, sub-prime lending,
To everything there is a season ... and a time to every
purpose under heaven.
--Ecclesiastes 3:1
It seemed the horses always knew first. Strangely void of their
carefree gait, the thick summer breeze and slow-motion silence must
have unveiled the secrets of the coming wrath. Long before
midnight, blue clouds rolled thick atop southern trees, and every
animal in sight with a God-given sixth sense, stood perfectly
still. Anticipating the fury that would soon rain down, even in
ethereal silence, they knew somehow that the storm was coming, and
coming quick.
By the time mere humans knew what hit my grandfathers farmhouse,
all that remained was a perfect row of empty shoes beneath the
kitchen table. Oblivious to all warning, five sets of shoes were
still neatly tied; yet vacant in the twinkling of an eye as men
flew across the room, thrust by one single bolt of lightning.
Thankfully, most of us have been spared such shock of sudden
change. Let us congratulate our industry analysts and annual
predictions. From the first time mortgage brokers heard the mere
rumor of an industry slow down, the whisper of RESPA reform, or the
day we watched Wall Street monuments crumble before our very eyes,
the portent of radical change was well told. Our forced evolution,
though no less painful, should now be a systematic tightening of
our belts as the wise man has mandated a survival regimen to become
more lean, and focused in purpose.
The Way We Were
In amazement, I reflect upon my start as a naive broker just 10
years ago, when American dreams sat high atop rolling hills,
resting in the sure win of a pension, 401(k), mutual funds,
technology, and economic staples like the auto industry or utility
companies. However, such confidence has been replaced with
late-night sales pitches: Find your safety net. Call today to start
your own home-based business!
Though once unscathed as pristine snow, the borrowers of 2004
have endured the wounds of economic warfare. The trust we held is
all but gone. Post-Sept. 11, post-WorldComm, Enron and K-Mart, the
search for the predatory lender and legislation to end cold-calling
& how can both broker and borrower do anything but evolve. As
30-year-old sons work beside their 65-year-old fathers in a quest
for more overtime, America--to say the least--has changed. Gone are
the days of innocence when trusting borrowers relied in full
confidence on the mortgage expert with all of the answers. After
three to four refis per household, and a barrage of warnings of
mortgage predators armed with pens, brokers have been forced to be
at the top of their profession even more. A business owner could
once trust a new employee to handle valuable clients, yet now
uncertainty compels us to hold the hand of the unknown element a
bit tighter, and watch closer and a bit longer. Compared to days
bygone, today I feel an underlying sense that brokers work daily to
redeem their name and prove that they are worthy to again receive
that innocent, pure trust.
Will the party continue? I doubt it.
--NAMB Past President Joseph Falk
With these succinct words, therein rests the whole truth of the
matter. As the music fades, however, we dont want the dance to
As we launch headlong into this new year, its safe to say weve
heard it all. The prophets of doom all say loan volume will "tank"
in 2004. In contrast are the eternal optimists who predict we will
prance forever on our yellow brick road to eternal originations and
high property values.
I believe the truth lies somewhere in between.
Without question, tomorrow will bring business opportunity for
the early riser. And, as every ounce of life is inevitably drained
from the refinance well, what remains will be the next pool of
emerging first-time home buyers.
One local Sunday real estate section reads Now you can afford a
new house--payments from $605 per month. Such hope is the ripe
fruit of the low interest rates that have saved industry veterans
and will create a generation of new dream owners.
Submerged in the Sub-Prime Waters
According to National Mortgage News, its not a matter of if, but
rather when the downturn comes; when the conventional refis slow,
sub-prime will gain space in the market share pit. When a
production downturn does come, sub-prime funders will weather the
storm much better than their conventional counterparts.
Conventional counterparts are now faced with the torn survivors
of one of the worst stock shocks and job markets in American
history. As laid-off fathers struggle to make new mortgage
payments, in the natural course of cause-and-effect, job loss
creates bruised credit, and bruised credit evolves into a class of
the reluctant sub-prime borrower.
Those who were foreign to the shame of 30 days late have been
pushed to cross the forbidden line by underemployment, and are now
submerged in foreign sub-prime waters. As they have tread water to
remain afloat, for many victims of the market crash and lost
pensions, the foundation of homeownership is their only refuge.
Statistics show that sub-prime lenders funded a record $241
billion in home mortgages in 2002, a gain of 33 percent in one
year. Many predict an upward trend will continue. Many years ago, I
plainly remember the disdain and dismissal of lenders and brokers
dealing with those loans. Survival says its time to wake up and
broaden our horizons.
To Everything There Is a Season
Our industry is experiencing a correction, with pay scales out of
balance and astronomical commissions that are cost-prohibitive for
small business owners. Mortgage brokers, though commonly tied
through the bonds of intimate family-style business, must mirror
the trimming of excess that every other American industry has
already embraced.
There are some roads upon which we turn, and others that turn on
us. As mortgage brokers trim their payrolls monthly, the bitter
reality is that small business must make the hard choices in order
to stay alive. We will either be the victors, or casualties, of
In spite of it all, the long-term outlook remains largely
optimistic. With decreasing unemployment and tentative consumer
confidence, we seem to be clinging on for growth. But let us not be
those who can discern the direction of the wind and tide, but
cannot discern the signs of this time. We must face the fact that
we are now, and will always be, evolving. Whether through new
legislation, interest rate fluctuation, unemployment or a slow
housing market, we are all irrevocably transformed by the events
that surround us.
A prudent man foresees calamity and girds himself. The storm
survivors are those who are diligent to find an anchor and embrace
it. They are the swaying arched southern trees that dust the ground
yet never break. Ultimately, this is our time to survive, and soon
rise again.
Anthony O. Kellum is Chair of the National Association of Mortgage
Brokers Affordable Housing Committee and Immediate Past
President of the Michigan
Mortgage Brokers Association. He may be reached by phone at
(888) 4-KELLUM, or e-mail akellum1@yahoo.com.


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