I have written a number of articles here on BiggerPockets outlining the mega-banks’ desires to eliminate the mortgage broker competition in the race for dominance in the retail mortgage loan market. Well some very interesting numbers came out this week, that may put the brakes on this all-out assault on mortgage brokers.
Mortgage Broker Vs. Bank Recap
The retail mortgage market has two main players. Banks with their national regulatory advantage, glitzy TV ad campaigns, and cost saving call centers. This was the foe pitted against the small business, usually “mom and pop”, mortgage broker.
On the surface, it would seem like David versus Goliath…and it is. But remember what happened to Goliath?
Well for years the same thing happened to the mega-model of retail mortgage origination. The brokers with their personal approach, local point of view, and a number of loan programs searched across multiple lenders gave them a “rate shopping” capacity consumers wanted that the banks didn’t offer.
Then the mortgage crisis hit. Brokers got vilified by the press, Congress, and the banks started licking their chops as the consumer reversed course. Banks started getting the majority of loan applications and brokers were left with the crumbs for most of 2008.
It was a major change in the market. Many lenders closed their support for the broker channel by shutting down their wholesale lending departments. Without wholesale lenders, brokers have no product to sell. I wrote many an article about the seeming demised of that side of the industry.
Then came the recent refinance boom that started in late January and ended last week with the recent rise in mortgage rates.
First Quarter Funding Numbers
Low and behold the top-residential funders of mortgage loans for the first quarter of 2009 are those banks that did NOT close their wholesale lending divisions. Those banks that did were at the bottom of the heap in retail home loan closings.
According to Paul, Muolo, at National Mortgage News,
“….Bank Home Mortgage of Bloomington, Minn., has moved up nicely (once again) in the rankings. Its origination volume swelled 44% to $13.4 billion, good for sixth place nationwide. Also showing strong growth was Provident Funding, Burlingame, Calif. Wells Fargo and Bank of America saw loan production rise by 50% and 133%, respectively.
…But here’s what is most interesting about the numbers: all of the firms with nice-sized gains are STILL in the wholesale/broker market. Got that? Among the top 10 firms that experienced declines, two (Chase and CitiMortgage) have told brokers to take a hike. (In fact, Chase’s Jamie Dimon, more or less, referred to brokers as … well, you can fill in the blank yourself.) Are these new (and exclusive) originations numbers a sign that brokers are still indeed a viable force?”
I’ll answer that question…
Banks, regardless of how evil they are, are not stupid. They would rather make a smaller amount of money by supporting mortgage brokers with wholesale lines than lose the business altogether.
We can thank the consumer who voted with his business by saying, “We don’t want a world were mega-banks are the only game in town when it comes to getting a mortgage. We want choice.”
This is the first ray of sunshine I’ve seen watching this systemic demonization of mortgage brokers over the past couple of years. As the housing market improves and if they Fed will get back in the game, we’ll continue to see robust mortgage broker market share improvement.
Mark my words…