Jul
29
THE END OF THE MORTGAGE BROKER ERA (PART III)
Filed Under General Thoughts and Comments | 2 Comments
If you’ve read anything that I have written in the past, you’ll know that I haven’t been a mortgage broker for over two years now. My old friends are telling me that none of the lenders are lending anymore. WAMU, Bof A, Wachovia (which bought World Savings), Indymac, etc… When I was a mortgage broker, these were the big guys. The ones that were always there.
There were smaller mortgage banks that had more niche products but the big guys were always there and always gonna be there and now they’re not.
Just where I live there are three new condo towers. One is completed and the other two are almost finished. How will anyone buy them? Unless they are paying cash (and I know that some are), there is no financing to get. Where is a crafty mortgage broke to go to get a loan for their client. If all the giants have left the building who is left?
The credit crunch and the housing crisis are inexorably tied to one another. They have always had a symbiotic relationship. Well, as I have said before, we cannot exit this recession (possible depression) until the banks are ready to lend again.
This new housing legislation will do little to ease the pain. It really only applies to people who can go “full doc” and those typically aren’t the people that are losing their homes (yet). It is the people who bought without having to prove their income that are in trouble. They are the ones who need help and they won’t get it. I actually agree that they should not. Why should the responsible people who didn’t buy a house because they could not afford it bail out those who did (via taxes)?
So back to the fate of the mortgage broker. My earlier blogs, PART’s I & II, illustrated how mortgage brokers were being made obsolete by technology and fierce competition. Now, I see their end because they are losing the very product that they broker. If the big lenders are no longer selling loans through mortgage brokers, what are mortgage brokers going to sell? That really spells doom for that industry. It may be one of the shortest lived industries in history.
Jul
1
In PART I, I discussed how I believe that Lendingtree.com and pricing engine sites like it have begun the demise of the mortgage broker. Now I want to discuss how new sites in our industry are changing the whole landscape of the business.Fairclosingcosts.com is a new site that does for all the ancillary real estate businesses what Lendingtree did for the mortgage business. Borrowers, buyers, and sellers can now go online and compare title companies, escrow companies, termite companies, etc… on price. They can enter the specifics of their transaction (usually just the price and location matter) and the site will spit up a list of vendors and what they charge. This site is a bit different than Lendingtree in that it does not sell leads. Vendors pay a minimal annual fee and get to be listed alongside their competition.This seems much more fair and even to me than some other sites I know of (for vendors and consumers).When I was a kid back in the seventies and eighties (I’m that old) I do not remember any pharmaceutical ads on TV. Now, that’s all I see. Soon, title companies and escrow companies will have to appeal directly to the consumer too. Gone, I believe, are the days when the agents and brokers get to pick. I hope that I am wrong on this one but that seems to be the direction things are moving in. I prefer to work with the same clients. It streamlines the process. I know how my clients (agents and brokers) work and what they like and I so do that.The new model will have the consumers picking whom you get to work with. They will most likely pick based on price, not on skill. Agents and brokers may have to now sell their favorite escrow officer or title agent to the client or they may get stuck working with the lowest bidder (and we all know that the lowest bidder is usually the worst choice).It looks like I may be made a commoditity once again. Viagra or Levitra? Zocor or Lipitor? CF Escrow or XYZ Escrow.In order to adapt, I too, must start to market to the public. I still will count on my agent and broker network because they all know the level of service that I offer, but I am going to have to shift my marketing focus away from them and towards the public, just like Pfizer did. In the end, it all works out. The consumer gets the benefit of lower prices as competition seems to do that and the agents and brokers get to meet new people and that’s always fun. Change usually scares me, as I think it does most people, especially when it affects their jobs. In this rapidly changing industry I am just learning to roll with the punches and move on. My only fear is that the government will start to overregulate the industry again. Usually added government regulation equals added cost to the consumer but I’ll save that discussion for PART III.
