While I am a mortgage banker and have been on both sides of the fence the past 29-plus years, it pains me to think what may happen if mortgage brokers are shut out of the lending business.
In recent weeks, there has been a number of articles and bulletins through industry publications, as well as the larger media circles, hinting that the era of “mortgage brokers” may be coming to an end. Without a doubt, there will be people who will use this small amount of information to say, “Hooray … can’t wait … don’t let the door hit you in the … etc., etc.” I would suggest to these people that they withhold their glee until they understand the true impact that the loss of brokers would have on the industry and borrowers in general.
I’m not here to explain my version of what went wrong and who did what, but I would ask people to consider that while there were obviously those who did not belong in the mortgage industry, there were many more who outnumbered them who did belong.
Many of these people are familiar faces in our communities who never had a problem with asking borrowers for a paystub or bank statement to prove they could repay a loan. They understood risk and they understood their responsibilities. These were friends and families who, just like you and I, had a job to do and but for a few did it professionally and with integrity. These were the people many of you sought out to find a better deal. Lower rates or lower fees in some cases, or they were able to be more creative to help those who needed to go outside the box. These are not the people who caused today’s doom and gloom and/or who took advantage. These people simply followed the guidelines issued to them by the lenders and hedge funds who figured there was no need for that paystub or bank statement.
The question going forward is, “At what price will homebuyers pay to simply purchase a home or refinance once the brokers and the competition they provide are gone?” In my opinion, it will be plenty. Competition will be limited to only a few large players comprising of mostly banks. While this may not be all bad, one will need to consider which bank to do business with. After all, some of the banks or companies still standing are the same participants who helped create the problem loans we hear and read about on a daily basis. In addition, the question remains unanswered as to which banks will be owned by the government, and if they are, how will that enhance their services and costs if at all?
Consumers will also lose that personal touch as brokers thrive on return business and referrals. Brokers usually can offer a better deal because of lower overhead, and as a borrower, you won’t be a number, but a true client. While banks can and should provide the same service, it is nearly impossible due to the sheer volume they receive. Further, they simply cannot compete with the entrepreneurial spirit that most brokers possess.
In closing, yes, I am a mortgage banker and proud to be one; however, I believe in Democracy, free speech and the spirit of the entrepreneur that separates us from all other countries. Right about now, I’m hoping that we do not lose sight of this by using this crisis as an excuse to end an era of business that is absolutely necessary. Good brokers provide a useful and necessary service to many Americans, and even as a banker, I would not want to see that be taken away from anyone, especially due to certain political and financial aspirations.
I would ask that before those who have the authority make this decision final, to please consider the need for competition and the individualized services that brokers bring to the table. I caution against a hasty decision and would hope that this hint of ending loans taken by mortgage brokers is reconsidered by all.
Joe Adamaitis is a senior loan consultant with Wells Fargo. He may be reached by phone at (603) 817-6543.