Very BAD time to be a mortgage broker

From the BBC:

Headline: Mortgage concerns hit US markets

US shares have tumbled amid fears that a wobble in the mortgage market may prompt a global credit crunch.

The Dow Jones index fell 199.24 points, or 1.5%, to 13,458.62. The S&P shed 1.7% and the Nasdaq lost 1.4%.

European indexes slumped earlier after the European Central Bank said it was pumping money into the banking market.

There also were reports that the US Federal Reserve was doing something similar to ensure that there was enough cash available for banks to use.

The latest trigger for the slump was an announcement by French bank BNP Paribas that it was suspending three investment funds worth 2bn euros (�1.35bn) because of problems with the US sub-prime mortgage sector.

Sub-prime lenders offer loans to consumers with a poor credit history.

In recent months, the number of loan defaults has increased because of higher interest rates, raising concerns that the wobble in the housing market will affect other parts of the economy and then start hurting other nations.

The worry is that should banks make losses then it would hurt their earnings and their profitability making them less willing to fund the takeovers and buyouts that have underpinned much of the stock markets' recent gains.

The recent collapse of American Home Mortgage, the 10th largest lender in the US, has intensified those concerns.

"You're looking at the foundation of a marketplace that has imploded somewhat," said Steve Goldman, an analyst at Weeden & Co.

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August 09 2007

bursts your bubble
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Countrywide Hit by Credit Market Woes
By JAMES R. HAGERTY
August 9, 2007 7:31 p.m.

Countrywide Financial Corp. faces "unprecedented disruptions" in debt and mortgage-finance markets that could hurt earnings and the company's financial condition, the Calabasas, Calif., lender said in a regulatory filing. (Read the SEC filing)

The company, the largest U.S. home mortgage lender in terms of loan volume, said reduced demand from investors is prompting it to retain more of its loans rather than selling them. The company also has been shoring up its finances. "While we believe we have adequate funding liquidity," it said in a quarterly filing with the Securities and Exchange Commission, "the situation is rapidly evolving and the impact on the company is unknown."
See the SEC filing from Countrywide Financial.

Payments were at least 30 days late on about 20% of "nonprime" mortgages serviced by Countrywide as of June 30, up from 14% a year earlier. Nonprime includes loans to people with weak credit records and high debt in relation to their income, as well as to people who don't document their income or assets. On prime home equity loans, the delinquency rate was 3.7%, up from 1.5% a year before. For all loans, the rate was 5%, up from 3.9%.

In a sign of the growing difficulty in selling loans, Countrywide said that it transferred $1 billion of nonprime mortgages from its "held for sale" category to "held for investment" in the first half. Countrywide marked the value of those loans down to $800 million. It also decided to retain as investments, rather than sell, $700 million of prime home equity loans, marking them down to $600 million. Countrywide has said many of those home equity loans were second-lien mortgages used by people who put little or no money down in buying a house.

And in predictable CFC news

NEW YORK (AP) -- The chairman and chief executive of mortgage lender Countrywide Financial Corp. exercised options for 92,000 shares of common stoc

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August 10 2007

Kary L. Krismer, "Krismer"
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Kary L. Krismer, "Krismer"

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The problem with mortgage brokers is some do tend to ramp up during the good times in ways that they can't quickly undo in the bad times. It's not that mortgage brokers can't survive this market, it's that some of them have made decisions in the past year or so that might not allow them to survive.

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August 10 2007

Matthew Kelly, "Matt Kelly"
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Matthew Kelly, "Matt Kelly"

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For the vast majority of Mortgage "Brokers", yes, it is a bad time to be in the business. I emphasize "Brokers" since there pricing, fees, and execution are not even close to what a Direct Lender of Coorespondent can offer.

The paradigm has shifted from being able to make a nice living closing two-three loans a month to requiring six to twelve loans a month. If you can't achieve that sort of volume, then your going to have a very tough time competing with the Quickens, E-Loans, or firms like mine.

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August 14 2007

jaysco
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Wow, did you just say Quicken and E-Loans. They are about .5% higher in rate and $3000 more in closing costs then most brokers. It will be a hard time for those brokers trying to refinance subprime borrowers, but for those of us that do 80% purchase business and have built up referrals through good real estate agents we will be fine. Who wants to talk with "Carlos" in Michigan about a property in Tennessee. Most of these Carlos' rent an apartment and couldn't get a hard money loan. Ask your "Quicken" customer service rep where he rents and then call someone local who knows the area and whom you can talk to with any questions after the closing. Let me guess the next thing you are going to say is that "Lending Tree" is great and that DITECH has the best deal going. Wilson 865-692-0899

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August 14 2007

David Sanchez, "davidsancar"
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Here is the information most agents and broker?s skipped on your financing orientation, now the market is on a verge of a disaster as lenders struggler to control the subprime loans.

I hope predatory brokers can live longer than Matusal�n.

Thanks to a already existing solution, I totally don?t understand some innocent home buyers got into sush risky loans.

Private mortgage insurance (PrivateMI) is the affordable, predictable, cancelable and tax deductible way to buy a home with a low down payment. It makes it possible to buy a home with a down payment of as little as three percent or less for qualified borrowers instead of the 20 percent down payment lenders traditionally have required for loans without insurance.

http://www.privatemi.com/

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August 15 2007

MelissWa
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Very nicely said Kary and Jaysco you're so funny! I think it's a great time to be a mortgage broker - as long as you know your stuff.

Since Wall Street isn't buying anything on the seconday market - I wonder how all those correspondent or direct lenders are going to pay off their warehouse lines?

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August 15 2007

!bank_owned!
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to Rob Robertson, what qualifies my comments? hmmmm...how about news about the melting mortgage industry on an almost daily basis now and it's only getting worse. look at the stock market. better yet, read this article (just posted today): http://news.yahoo.com/s/nm/20070815/bs_nm/markets_stocks_dc_53

am i mortgage broker?! No, and I'm very glad i'm not one. remember this, mortgage brokers CREATED THIS MESS and the Fed allowed it. sorry, but that's the truth...if you're an honest, hardworking mortgage broker...good for you. i'm sure you can sleep well each night. but i must admit, mortgage brokers (at least around here in So Cal) are now the equivalent to slimy, deceitful, used car salesmen.

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August 15 2007

Paul Pope, "sparky56"
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It is a tough time to be anything in the mortgage business right now, much less a mortgage broker. But, If you are a small broker shop without a lot of overhead and have diversity in your operation you can survive this shakeout. It will become more challenging the higher the overhead and less diversity you have in your operation.

PS--Mayno, Brokers did not create this mess, it is much more complex than your feeble attempt to explain the economics of this business.

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August 15 2007

Matthew Kelly, "Matt Kelly"
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Matthew Kelly, "Matt Kelly"

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Quicken, E-Loan, and Ditech may very well be a 1/2 point higher in rate, but they can reach out to the masses where the Local Mortgage Broker can't. Lending Tree does level the playing field for borrowers by introducing them to experienced, knowledgeable, and reputable Mortgage Bankers. So yes, I think Lending Tree is great.

Not only can the above mentioned Companies reach out the masses but they can process, underwrite, close and fund in house. Customers don't have to worry about their Broker calling them and saying "Sorry Mr. Jones I brokered your loan to American Home and they just went out of business. I'll give you a call in a couple of days when I figure out what I am going to do."

Realtors and Brokers that slam Lending Tree (or an on-line Lender) typically do so because they loose business on a regular basis to LT Lenders or Realtors affiliated with realestate.com.

Not only can they reach out the masses but they can process, underwrite, close and fund all in house. Customers don't have to worry about their Broker calling them and saying "Sorry Mr. Jones I brokered your loan to American Home and They just went out of business. I'll give you a call in a couple of days when I figure out what I am going to do."

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August 16 2007

Rob Robertson, "Mortgage Broker"
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Rob Robertson, "Mortgage Broker"

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Mayno, you need to get educated.

The news is just that, news.

Mortgage Brokers did not create this developing credit crunch.

The current credit crisis extends globally, for so many reasons it would not be prudent for me to elaborate any further.

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August 16 2007

Rob Robertson, "Mortgage Broker"
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Rob Robertson, "Mortgage Broker"

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"Matt Kelly," regarding Lending Tree, I have to disagree with you. Lending Tree, "when banks compete, you win," puts consumers at a disadvantage when it comes to "shopping for a mortgage."

The disadvantage is that the consumer thinks that by shopping for a mortgage by rates and closing costs only, they will get the best mortgage possible. However, that's not usually what happens. They choose their lenders based on initial, low-ball quotes.

Then, the well-scripted loan officers on the L.T. Network size up the consumer, find the hook, bad-mouth the competition (including brokers), work up the deal, blame any changes in closing costs or rate changes on someone else, roll the dice and hope to get the deal.

Lenders on the LT Network have to pass on marketing costs to the consumer, which are (last time I checked) around $1100 for each 1st mortgage funded, plus actually paying a fee for each lead purchased (not sure how much they cost now, but were around $7 to $11 per lead when I was on the network; could take 30-50 leads to get a deal). Add desk and fixed costs, admin staff, secondary marketing, licensing, etc... and you'll find that the average consumer is probably paying about $3000 more for a loan from a "Direct Lender" or "Lending Tree Network" Lender than the exact same loan from a fair and honest Mortgage Broker.

Fair & honest mortgage professionals end up losing business to Lending Tree, mainly because of low-ball quotes from a Lending Tree lender (or other Direct Lender) vs. an honest, "right between the eyes" quote from a broker. By the time the consumer commits to the LT Lender deal, it's hard to sway the consumer back because of lock fees and appraisal commitments.

As a broker, my house costs are just $600. This translates to lower overall costs to my customers. I also operate under the "Upfront Mortgage Broker" philosophy. I offer true wholesale par rates, and charge a fee for services rendered, & pass on true 3rd party costs.

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August 16 2007

Stacey Robertson, CMPS, "The Navigator"
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Matt, thank you so much for giving me a reason to write a post! I hope you're up for a rousing debate.

Lending Tree's irresponsible advertising and business practices are the reason for the mortgage meltdown.

Every mortgage professional who has closed even a single loan knows how easy it is to lie on initial disclosures. It's illegal, but the law is unenforcible because there are so many variables to the loan process.

Lending Tree's slogan, "When banks compete, you win," leads unsuspecting borrowers right into the hands of liars. Unless the borrower is very lucky, it's the best liar who wins - not the borrower.

The slogan has trained the entire country to shop for a mortgage blindly. The morally responsible thing for Lending Tree to do after they came up with that multi-billion-dollar slogan was to immediately establish and enforce ethical standards of admission into their network. But they didn't do that. It was all about the buck.

Lending Tree could have prevented this whole mortgage meltdown from happening if they had any sense of obligation to the borrowers they were luring with that slogan. The borrowers could only win if everyone competing was honor-bound to tell them the truth. Because honor is the only way a borrower is ever going to get the truth from a mortgage professional. Honor was not on Lending Tree's list of criteria for admission, so here we are.

Greed is why the mortgage industry is in the mess it's in. That slogan drew a line in the sand and every mortgage professional had to choose a side, whether they belonged to the Lending Tree Network or not. What kind of character does it take to tell the truth when it's so much easier and more profitable to lie? It's frustrating to be the one telling the truth, but on paper you look like the greedy one.

Why do you think Mayno, and everyone he knows, views mortgage brokers as "slimy, deceitful, used car salesmen"? In the mortgage industry, it doesn't pay to tell the truth.

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August 16 2007

Matthew Kelly, "Matt Kelly"
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Interesting point of view Rob......sorry that you worked for an LT shop that took the approach you outlined above.

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August 16 2007

Rob Robertson, "Mortgage Broker"
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Rob Robertson, "Mortgage Broker"

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Hang on a minute, Stacey...

It's not Lending Tree's deceiving advertising and the LT Lenders business practices that are the sole reason for the mortgage meltdown.

How can you give them that much credit?

I guess you think that Ditech's current slogan, "People are Smart!" is going to be the "final nail on the coffin?"

Convincing the average consumer that they are smart and that when banks compete for their business, they win, is just a marketing ploy to get them to call.

How smart is a consumer that pays 3+ points for a Conforming 30 year fixed rate loan? (Run the APR on the current Ditech advertising: 6.125% Note Rate with a 6.408% APR = a little over $12,000 for a $417,000 loan amount, probably is a low-ball anyway by the time the dust settles and 3rd party costs are factored in).

OR,

Actually believe a salesperson from the Lending Tree network that an underwriter determined that their "credit risk" warranted an additional 1.75% in upfront fees on a new 1st mortgage"...to securitize the loan on Wall Street against losses".

I could go on and on, Stacey...

Come on, this current credit crisis is global in scope; its reach is so much farther than a company that came up with a catchy slogan .

Do we need to start a separate blog/topic?

CONSUMERS NEED TO BE EDUCATED! There is so much more to a mortgage than closing costs & interest rate. Both short and long term financial goals need to be considered, as well as a realistic need for homeowners to reduce their own exposure to risky loans. Each borrower is different, with different needs and circumstances, PERIOD.

The average consumer needs their hand held, when trying to work with a direct lender like a Lending Tree Network Lender. The avg. consumer probably doesn't stand a chance against a good salesperson, when it comes to setting up a mortgage.

Unbiased mortgage advise, which must be paid for (TINFL: There is no free lunch), is one solution.

"PEOPLE CAN GET SMART!"

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August 16 2007

Rob Robertson, "Mortgage Broker"
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Matt Kelly, Not only did I work for one, but I've also competed against several "Lending Tree Quotes" since I left that Lending Tree Lender.

I'm sure there are some great Lenders (and even a few Brokers) out there that use Lending Tree as a marketing/business partner.

I just get a little "tickled" the wrong way when mortgage broker's get slammed and blamed...

Take care.

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August 16 2007

Suburbob
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Wow! I am a consumer just looking for a little more education on mortgages
since I haven't had to shop one in years. I am in the Dry Cleaning business in Dallas and one of the rules my father taught me was not to badmouth our competitors, just do a better job. I know you don't really mean to come off as threatened, and scared as you sound. I think we all understand that your job has become extremely more difficult to do in the last few weeks, and we do understand. But as an educated consumer I am willing to weed thru to obtain the best mortgage for me, I will go fixed 15 yr to the Cheapest cost I can find.

Good Luck!

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August 16 2007

Paul Pope, "sparky56"
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Suburbob.....if you really want to the cheapest mortgage....try one with no refinance, no change in payments.

Check this out.......http://www.popemortgage.com/main_MMA.php?section=about

Email with any questions....paul@popemortgage.com

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August 16 2007

Ifinanceyourhome
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It's a GREAT time to be a mortgage broker.

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August 24 2007

mel617954
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Here's a solution for those people who think its a bad time to be a mortgage broker.

I found this site the other day: www.HiringLoanAgents.com

They are offering 100% commission split to RE Agents and Loan Originators with a low monthly fee of $275 and unlimited transactions. I'm seriously considering this since my current overhead is over $1500 per month.

They are also offering $50 for every agent you recruit. As it says on the website, if you have six recruits, they will pay you $300 every month.

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August 25 2007

Mark Miskiel, "miskiel"
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I laughed when I read all the comments about the dot com lenders such as Lending Tree and E-Loans etc. All one has to do is go to their website and see that they are pushing the most risky kind of loan that's available... the negative mortization/option loans. I remember reading an article about the default rates on thses types of mortgages in the Wall Street Journal and it is something like over 70% of homeowners with this kind of mortgage are in default. These are the mortgages that start out around 1% or 2% and the mortgage balance increases ever month. They market the heck out of those loans and make it sound like the best thing since sliced bread but all they are doing is taking advantage of uneducated consumers who believe it's a good deal becuase of the low rate. Yea like there is a free lunch! As far as Ditech goes... just Google the words Ditech Loan Complaints and I think you will see that their service to the customer just plane sucks. Anyway, I seriously doubt that the dot com lenders are taking that much business from any mortgage person or Realtor and that the so called paradigm shift was caused by them. If anything the dot com lenders have used effective marketing to bring in the absolute most ignorant customers who think that if it's in print it must be real. They are the same suckers who think that a 1% or 2% loan loan will not have any catch and then claim that they were wronged or harmed by the lender at a later date when they have some financial difficulty. Like any business, there are up and down cycles and if you happen to be in mortgage banking it's just a little tougher but you can survive. Anyone remember when rates were 16%-17% range on home loans many years ago? The banks, mortgage people etc survived and people purchased homes yet the general public got all shook up by the daily barage of negative information that the press put out there. Stop listening to the press and look for the opportunities

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August 25 2007

ronaldbender
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Thanks to the media for dwelling on all the Foreclosures,with all negativity that the press gives out its no wonder the the economy and housing markets suck...

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August 25 2007

Paul Pope, "sparky56"
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Miskiel.....please show me where you got the 70% default rate on those "negative amoritization loans. That is an absolutely ridiculous statement.

Companies don't market "uneducated consumers" to take advantage of them. Education is never a demographic of data. But I am sure you meant that as an off the cuff remark. You are all over the map with your comments.

You are no different than the Merill Lynch analyst who claimed that Countrywide was going bankrupt, sending their stock and the markets in a tailspin.

Your irresponsible, off the cuff remarks, is what people need to stop listening to! Repeat after me....."I have met the enemy and he is me"!

PS---A word of caution.....putting slanderous remarks you cannot substantiate about major companies like Ditech is a good way to get yourself sued! If I were the management of Ditech you would be talking to my attorney right now. (And you can't hide behind that ip address either!)

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August 25 2007

Mark Miskiel, "miskiel"
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Hey sparky, chill. Please value my opinion as I do yours.

Like I said, in my comment... I think I remember reading about the default rate in the Wall Street Journal, I am almost sure thats where I found it but I really don't recall where it was posted. I do remember the content of the article and it had said that banks don't have to report how many option ARMs they underwrite but default rates on option arms were estimated to be around 70%.

Regardless, all anyone needs to do is to Google "option arm default rates" or "option arm issues" and there is article after article with warnings about these types of mortgages and how many customers are "uneducated" and dont understand how they exactly work. BusinessWeek had an article titled "Nightmare Mortgages" which addressed these types of mortgages and one source actually called it "The world's most dangerous mortgage."

I did not say they were marketing to uneducated consumers. I said "They market the heck out of those loans and make it sound like the best thing since sliced bread but all they are doing is taking advantage of uneducated consumers who believe it's a good deal becuase of the low rate."

Marketing of any product is going to promote reasons to purchase that particular product and it certainly is not going to point out the negative. If the consumer believes the hype without doing research and is ignorant of all the facts then shame on them. However that same consumer usually points the finger at someone else and takes no account for their actions.

As far as slanderous remarks... if you Google the words " ditech loan complaints" you will see numerous complaints and comments about poor customer satisfaction and warnings to stay away from them. I was not making slanderous remarks only stating what anyone can find if they do some research.

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August 26 2007

David Ayneh, "Sales_Doctor"
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Yes it may be a bad time for mortgage bankers; however as a professional mortgage broker when you put together your numbers in a currect way, it is still a great time to provide financing for so many households.

In fact this may be a best solution for some mortgage brokers/bankers who are not capable to handle their business to move out and leave this industry in the hands of professionals who really come from financing background.

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August 26 2007

Paul Pope, "sparky56"
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Miskiel, great, I think it is important to report the facts. It is also important to understand the bigger picture of what results also imply. For example; I am not surprised that DiTech has a lot of complaints. They make literally thousands of loans. Have you ever looked at the Better Business Bureau rating for every major bank or mortgage company? Countrywide, last I looked was an F, Washington Mutual an F, Bank of America an F. If I had a dollar for every customer that claimed they did not understand their "ARM" I would be retired right now. It is simply not true that these companies do not disclose or lie. Granted there may be a few rogue loan officers but it is probably rare. Every one of these companies record customer calls and monitor quality controls and compliance. My company does the same.

The majority of customers know what they are getting and are only jumping on the bandwagon of popular opinion.....which is "woe is me". It is their fault that I am in this position. I could go on....

There is a much bigger problem and it is one the govt and feds have failed to address. They don't have the right loans in place to help prevent massive payment increases. The average customer just does not plan for the future.

Anyway, I appreciate your feedback.

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August 27 2007

Erica Higgins, "A E Contract Process"
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REDUCING YOUR OVERHEAD? OUTSOURCING IS THE WAY TO GO....

PROCESSING YOUR LOANS AT NO COST TO YOU!!! FAST, ACCURATE AND ALWAYS AVAILABLE!! WHEN YOUR LOAN CLOSES WE GET PAID - IF THE LOAN DOESN'T CLOSE WE DO NOT GET PAID. WHY PAY SALARIES, VACATION PAY, EMPLOYER TAXES AND PROVIDE BENEFITS. FOR AN IN HOUSE EMPLOYEE TO WORK LOANS THAT DO NOT CLOSE. NO MORE HASSLE OF HIRING, COVERAGE WHEN SOMEONE IS SICK, OR TAKES A VACATION. YOUR LOANS ARE ALWAYS BEING WORKED WITH NO WORRY OR COST TO YOU. 15 YEARS INDUSTRY EXPERIENCE.

A & E CONTRACT PROCESSING 623-444-4242

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August 31 2007

Lending Lass
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It is a very good time to be a lender. A lot of "order takers" who became realtors or lenders during the surge will leave the industry. I wish them well, and would not want anyone to lack a job and income. But those lenders (and realtors) who are professionals, have knowledge can make a decent living. As far as direct lending vs brokering, making a blanket statement that a direct lender is always better is just not true. A good and ethical broker can come in with the same competative pricing and fees of a direct lender, and they also have more options should the client need them. I have done both, and I have seen abuses, poor knowledge, lack of professionalism in both arenas. Choose a lender who comes recommended to you, and if you have had a good prior experience, check back with your last lender. I have been blessed to close some exceptionally difficult loans, and that was made possible by all my many hard-earned yrs of gaining expertise, and also by being willing to work hard for my clients. Many people in the industry want the easy deals. Imho, every client deserves a lender who goes the extra mile for them.

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September 08 2007

Average Rates	Today	Last Week
30 Year Fixed	4.52%	4.61%
15 Year Fixed	4.12%	4.19%

15 year fixed	4.00%	1 min ago
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10 year fixed	4.75%	1 min ago
15 year fixed (FHA ...	4.50%	1 min ago
10 year fixed	4.25%	1 min ago
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5/1 ARM	3.75%	1 min ago
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30 year fixed	4.75%	1 min ago
30 year fixed	4.88%	1 min ago
30 year fixed	5.00%	1 min ago
30 year fixed	4.25%	1 min ago
30 year fixed	4.62%	1 min ago
15 year fixed	4.00%	1 min ago
15 year fixed	4.12%	1 min ago
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15 year fixed	3.88%	1 min ago
15 year fixed	4.00%	1 min ago
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30 year fixed	4.75%	1 min ago
15 year fixed (FHA ...	4.25%	1 min ago
30 year fixed (FHA ...	4.50%	1 min ago
15 year fixed (FHA ...	3.88%	1 min ago
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30 year fixed	4.38%	1 min ago
30 year fixed (FHA ...	4.50%	1 min ago
15 year fixed	4.12%	2 min ago
30 year fixed	4.62%	2 min ago
15 year fixed	4.12%	2 min ago
30 year fixed	4.62%	2 min ago
10 year fixed	4.25%	2 min ago
15 year fixed	4.25%	2 min ago
30 year fixed	4.88%	2 min ago
15 year fixed (FHA ...	4.00%	2 min ago
30 year fixed (FHA ...	4.50%	2 min ago
10 year fixed	4.25%	2 min ago
15 year fixed	4.25%	2 min ago

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