National Mortgage News reported last week in a survey recently completed, mortgage brokers are now only receiving 18.9% of the orignation Q3 market place. This paltry percentage of originations is an all-time low figure. Mortgage broker market share reached almost 80% just a few short years ago.
Mortgage Broker Demise Premature
The report hypothesized the reason for the decline of Q3 mortgage broker market share was the closing of many of the major bank wholesale operations as well as more than a handful of thrifts, like IndyMac. The report went on to speculate bank retail was now the “dominate” channel for residential mortgages.
This is all true, but don’t count out the mortgage brokers just yet. There are reasons behind the numbers and as usual, they can be misinterpreted quite easily.
The real reason the numbers are skewed in favor of banks currently is because the only lending being done right now is FHA lending. Prime conforming loans, those loans mortgage brokers excel in delivering is completely dead right now while all the “subprime turned FHA” is as hot as pistol.
So if you look at it that way, it’s not that the public has turned it’s collective back on the mortgage brokers…although I’m sure the banking industry would love to promote that idea…it’s that the “smart money” is taking a breather. Savvy borrowers who have choices are choosing not to borrow mortgage money right now…and that’s no reflection on mortgage brokers personally or professionally.
Combine that with the only active part of the mortgage origination market being those folks who don’t have choices…the resetting ARM borrower with bruised credit. This borrower HAS to refinance or face losing his home when the ARM resets.
Where can he turn?
Well HUD, FHA, and everyone else who should know better, turned FHA into a subprime dumping ground months ago. So FHA will refinance that subprime loan with few questions asked.
Who can do FHA loans?
Banks can (virtually all are FHA approved)…but not most mortgage brokers…that’s who.
So it’s really no surprise that the current market share is shifting in favor of the banks. It is only a temporary shift in market demand that will hopefully return to normal once the prime credit customers (the lion’s share of the market over the long term) come back into the market.
The Market Needs Brokers
If banks want to boast about “pushing out” the mortgage brokers, it’s a false argument but I’ll let them have it. Consumers rule in this market and mortgage brokers have done better for the consumers than banks over time.
I just hope this non-stop legislative battle to eradicate mortgage brokers doesn’t take it’s toll before prime mortgage demand rebounds. I can’t imagine leaving the average consumer in the hands of five or six mega-banks for mortgage money.
If that happens mortgage rates and fees will rocket out of control needlessly. Mortgage brokers are a “check-and-balance” against mega-bank excesses. If they die, the whole idea of competition keeping down costs gets tossed right out the window.
To that end, I proclaim…”Long live the mortgage broker side of the industry”.
What do you think?