Nobody is real sure about the future of mortgage lending. It really seems like the real-estate market and lending world has plowed forward like a steam engine w/ placebo for energy. The positive thinking and perception of the public towards our industry has powered our economy as a whole, seemingly. I’m not an economist, but I am a mortgage consultant making that statement. The atmosphere that is created through the aforementioned style or reason for growth is not one that in the end I think people will be happy of. The atmosphere is more like a school of sharks in a feeding frenzy rather than a bow fisherman who targets only trophy fish. Quantity VS. Quality or better stated, Wholesale/Broker VS. Banker.
The broker or wholesaler is all about numbers and quantity. As I have worked the majority of my career as a broker and the last year as a banker, the one difference that I notice above all is, ATMOSPHERE. Account reps for wholesale banks, investors, and lenders use phrases like “can you sell this…”, or “when you are selling this to your client…”. That disgusts me! In my position, “selling” can ruin the financial stability of a whole family and take decades to overcome. The thing is, that phrase is being taught and trickled down from the heads of those companies and if it didn’t get “numbers” in the door, they wouldn’t do it. So, there are stinking Loan Officer’s out there “selling” loans that aren’t in the best interest of the clients. Heck, once that loan is closed, then funded, and then sold to the servicing lender (usually bank), they can move on to the next VICTIM. The loan is no longer their liability.
When you are a banker, you have more responsibility and a little “skin in the game”. It creates pride among the employees and the “atmosphere” breeds success in targeting clients’ best interest. Now, you aren’t trying to get loans to people that shouldn’t qualify and don’t deserve them…if they foreclose, it can hurt the future of your company/bank. Bankers care more about their clients, and the establishments are full of consultants and not pressure slick salesman. Our/banker’s head people are interested first in profitable loans that don’t foreclose, not number of closed loans.
Articles everyday are passed on from experts in the field that tell us that the broker world is seeing it’s last days. If that isn’t the case, we’ll soon see a huge change in the way brokers/wholesalers are held accountable for their actions. They are at the heart of this lending industry downfall. They are the ones that are putting the pressure on the appraisers to squeeze every dollar out of the value of homes to roll in closing cost. They are the ones that are pressuring underwriters to accept over inflated appraises so they can get their commission. They are the entities that offer the interest only coupled with 100% financing for super low credit borrowers. When 3 wholesale subprime companies offer 100% financing at 580 and a bank has two choices: 1. Don’t offer it and lose a lot of acknowledgement as Loan Officers begin to go elsewhere for ALL of their loans and for sure where they can “get tough loans closed”. 2. Reduce their minimum guidelines in hopes that they will not see too much collateral damage and outlast the lesser sized wholesalers. As a broker, I didn’t use Bank of America much because many borrowers were hard to get approved there, and when they did get approved, the underwriters were too picky. Well in the end, look who comes out on top.
It is important that I mention, not ALL brokers are pressure slick salesman, but the atmosphere the broker works in definitely inhibits lesser integral lending. I’m anxious to see what the mortgage world will see.