The Death of the Mortgage Broker?

With all of the upheaval and continued government involvement in the mortgage industry, the mortgage broker has been added to the endangered species list if you haven’t already noticed. A mastermind group of some of the top originators in the country over years past addressed this issue of how the mortgage broker will survive in this industry and will be able to continue originating loans. That group saw the writing on the wall back in March of 2009. With HVCC (Home Valuation Code of Conduct that requires all conventional loans to be handled through a 3rd party Appraisal Management Company with no communication allowed between the mortgage broker and the appraiser) now required on each and every Conventional (Fannie Mae/Freddie Mac) loan as well as the new HERA and TILA guidelines in effect on every loan, this further pushes the broker to the brink of extinction. Let me be sure to make mention of the fact that HVCC, HERA and TILA were all instituted very recently and AFTER this group spoke in March about the very real issues facing mortgage brokers. Since then we have also seen Colonial Bank file for Bankruptcy. They have been reported to have supplied 25% of the warehouse lending available to the mortgage market for mortgage brokers to utilize to fund deals through wholesale lender channels. And if that wasn’t bad enough, we recently saw Taylor Bean & Whitaker be forced to close its doors by the government due to being “cut off” for failure to provide proper documentation to HUD and other government agencies. They were one of the largest wholesale lenders left in America and were a huge ally to the mortgage broker as a wholesale lender. They did not have a retail channel like what you see with Wells Fargo. They were the largest funder of Manufactured Homes in the country.
So what does this all mean? Well, lenders would impose tighter underwriting guidelines coupled with a very strict policy on loan fallout(loans that don’t close) in order to continue to do business with mortgage brokers. This creates a chicken before the egg or the cart before the horse kind of a dilemma. You see, for the most part, tighter guidelines and absurd loan conditions from underwriters are causing loans to fall out and thus causing lender/broker relationships to be severed. That clearly leaves the broker in a major predicament. No where to send loans!! In addition, for the brokers who still have wholesale lending partnerships to be able to send loans to; underwriting, review times and appraisal issues and blah blah blah have made it near impossible to close a loan in an acceptable time frame – say 30 days or so. Is that broker funding FHA loans? Well, I was told that about only 10% of brokers are FHA approved and guess what, most loans are now FHA (cue the daunting music.)
And now for what is potentially on the horizon: the elimination of YSP or Yield Spread Premium which is how the majority of mortgage brokers are compensated for sending loans to lenders. This would just about break the back of the mortgage broker.
Well, with all of this being said, it’s good to be a mortgage banker! We are underwriting our own loans and funding our own deals. If I have a question about an underwriting condition I can just pick up the line and discuss it with them directly. We can close loans in about 10-12 days thus eliminating the issue of putting the deal into another lender’s hands to take 45 days because they don’t care about the borrower.
I have nothing to back this up but I would venture to say that almost every mortgage done moving forward will be through a mortgage banking relationship. Let me also say that as a former mortgage broker I have had to deal with every single one of these struggles. It’s about positioning yourself for the long haul. So here I am – positioned well to move forward. I look forward to helping you or your clients!

Want a raise? How to get a 16% increase in pay in 2010

“You don’t know what you have until it’s gone.” If you fit the category, you have a special opportunity. But, you have to act quickly! There are only a few more months to take advantage of the FREE $8,000 tax credit incentive provided through the Federal Government. This credit is specifically designed to motivate the 1st time home buyer. This is a credit, not a deduction. A credit is dollar for dollar where a deduction is percentage or an amount that reduces your overall adjusted gross income. The latest U.S. average household income is $50,233 and that number is from 2007. If I were to guess, it’s probably dropped since then. That means that an $8,000 check in your hands from the IRS is a 16% raise if you are “average” in the U.S. for 2010. Quite honestly, it’s a bigger raise than that for next year because the income is based on before tax income, not after tax. These 8,000 smackers are tax free.
Most 1st timers are looking for homes up to $200,000. With foreclosure home prices stabilized, if not on the increase in this price range, it is extremely important to be approved and ready to make an offer to meet the time line on this FREE money. I am now hearing stories from my realtor partners and from pre-approved clients that they are putting in 5-10 offers before being successful on an accepted contract.
What does this mean for you? It takes TIME. With the clock already ticking on the tax credit (November 30th it will expire) you must be prepared to be under contract by the end of October. Just to be safe, you should aim to be under contract by October 15th. That may seem like a lot of time but once you begin the home search and fight everyone else out there trying to beat the clock you will see that time is of the essence.
Luckily for my team, as a mortgage bank, we underwrite and fund our own loans so our time to close on a transaction can be as quick as 10 days. But, for the typical mortgage broker in today’s lending arena, about 45 days is what they will really need in order to be successful and make everyone happy by November 30th. If you find yourself in a position where you FINALLY are able to get under contract on a home and you are near the end of October or into the first week of November, don’t panic. While the big banks and the mortgage brokers will be hard-pressed to make that happen there will be mortgage banks available such as my own that will be able to service your mortgage needs.
Q: Who could use the $8,000? A: Everyone! I have yet to run into someone who has told me they aren’t interested in free money. Q: Will it be extended? A: The honest answer is maybe. Who knows? But if you don’t want to have to refer back to the quote that started this post, I suggest you get moving or get this into the hands of the person you know needs to get moving.
If you have any questions or concerns about this or other related topics, please contact me at jwilliams@mountainridgemortgage.com

Lenders Continue to Ask a lot of Mortgage Applicants

Borrowers need to prepare for items asked of them that seem “out of the ordinary” when going through the mortgage process these days. As the recession drags on and the flow of credit and money continue to tighten, so do the lending guidelines tied to mortgage applications. Gone are the days of the No Income No Asset, No Doc and of course the coveted 100% Zero Down loans. I get a lot more sleep at night knowing those mortgage products aren’t floating around out there any longer, but every day it becomes increasingly more difficult to fulfill lender guidelines.
In hearing from a fellow mortgage broker in the business, he was commenting on a loan approval he just received back from the lender. The approval contained 46 loan conditions that needed to be fulfilled in order to close the loan. 46!!! Three to four years ago you could have turned in a blank loan application to a lender and you wouldn’t have received 46 loan conditions! The first condition would have been: What is your first name? The second would have been: What is your last name? And so on and so forth. Lenders typically bundle their funded loans and sell them on the secondary market to investors. Well, with a damaged secondary market, lenders are extremely fearful of running across any loans on their books that they cannot bundle and sell to these investors. The inability to sell these loans keeps them from turning around and using those funds to fund new loans and thus the cycle. That is how we have the issues we are seeing today: extremely touchy underwriting.
Your mortgage broker is NOT trying to make your life miserable when they ask you for items that seem off the wall. My advice is to take a deep breath. Relax. Take it all in stride. After all, this apparently is all in the name of good underwriting practices and closing your mortgage loan.
Heck, at least you’ll be able to chat around the water cooler with your co-workers and say “So I’m buying a house and you’re not going to believe what my lender is asking me for…”