I have been focused on what the big banks are doing to the mortgage broker industry because as someone who works for a correspondent lender, it’s closer to home. I am convinced that the big players are attempting to wipe out the mortgage broker industry while smearing it with mortgage meltdown blame so they can keep their hands clean. (If anyone can provide proof of a bank admitting they created mortgage programs and guidelines that were instrumental in creating our current climate, I’d appreciate it). I believe some major banks see this period in history as a grand opportunity to grab as much mortgage market-share by stepping on the little guy. And it appears they may be doing it to their own mortgage originators who are employed at home loan centers.
Over the weekend, The Seattle Times covered a local story about how a group of employees from JP Morgan Chase’s home loan center in Bellevue “made some mistakes” when they “jumped ship” for a mortgage company. What struck me, besides what it’s reported the employees did, was their reason for leaving:
“What prompted the mass migration. According to written statements from the lending officers, last fall it got increasingly difficult to complete the deals they lined up after Chase moved it’s loan processing from Bellevue to Tempe, Ariz. And in January they were told their work would be shifted into the bank’s branches….”
JP Morgan Chase has a much larger local presence with the acquisition of WaMU and their network of bank branches. Will Bank of America do the same with Countrywide’s home loan center loan originators? I’m assuming that loan originators located inside a bank branch are not compensated the same. Banks could employ people with less experience and originators who do not have their own client base…they’re counting on consumers to just walk on in and apply for a mortgage….just trust “the bank”.
I know that if I worked for a mortgage bank loan center, I’d bone up on my Teller skills.
Hi Rhonda,
A couple of things. First, yes we would expect banks to kick brokers to the curb in this market and shine the bad light on brokers instead of taking the blame for their own lack of good underwriting. If the banks admit blame, that opens the corporation up to liability and no corporation would want to take that path.
We are all to blame.
There are all kinds of broker business models. If the broker industry wants to start cleaning itself up, the 1099 independent loan originators who are operating with zero oversight by their broker would be the first on my list to scrutinize. Brokers ALONG WITH the bankers, should study where the biggest problems lie, and together create a new “best practices” model that brokers can follow.
If the broker follows the “best practices” model, then those brokers would be able to forge new, healthy relationships with their bankers.
Hi Rhonda,
A couple of things. First, yes we would expect banks to kick brokers to the curb in this market and shine the bad light on brokers instead of taking the blame for their own lack of good underwriting. If the banks admit blame, that opens the corporation up to liability and no corporation would want to take that path.
We are all to blame.
There are all kinds of broker business models. If the broker industry wants to start cleaning itself up, the 1099 independent loan originators who are operating with zero oversight by their broker would be the first on my list to scrutinize. Brokers ALONG WITH the bankers, should study where the biggest problems lie, and together create a new “best practices” model that brokers can follow.
If the broker follows the “best practices” model, then those brokers would be able to forge new, healthy relationships with their bankers.
Also, when the market shifts, banks will begin to court brokers again. Will the brokers run back to the banks? Of course they will.
“If the broker industry wants to start cleaning itself up, the 1099 independent loan originators who are operating with zero oversight by their broker would be the first on my list to scrutinize.”
I”ll throw you a complete surprise, Jillayne. License EVERYBODY who touches a federally backed or insured loan program; originators, processors, underwriters, etc. (bank or broker)
Wow, that IS a surprise. I’m completely biased of course, because doing so would mean a huge revenue boost to course providers so I’d have to put my bias aside to think about this. Help me out. Why license everyone?
The sales people are the people who are more motivated by personal self interest v. a salaried processor or underwriter.
Underwriters who approved bad loans did so under pressure from management.
Wow, that IS a surprise. I’m completely biased of course, because doing so would mean a huge revenue boost to course providers so I’d have to put my bias aside to think about this. Help me out. Why license everyone?
The sales people are the people who are more motivated by personal self interest v. a salaried processor or underwriter.
Underwriters who approved bad loans did so under pressure from management.
underwriters who approve bad loans did so under pressure from management…
appraisers who…lenders who…realtors who…we are all to blame she sez…
whoa now,
I, indeed most of yer citizenry, are not to blame.
underwriters who approve bad loans did so under pressure from management…
appraisers who…lenders who…realtors who…we are all to blame she sez…
whoa now,
I, indeed most of yer citizenry, are not to blame.
Jillayne, shouldn’t we eliminate underwriters who can be influenced by management or approve bad loans? I think Brian’s right–license everyone–background checks…the works….bankers, brokers, correspondents…anyone who touches a residential loan application….processors too. Licensing will give every aspect something to lose.
Jillayne:
I disagree that loan originators are more motivated by self interest.
Self-interest is a universal. It must always be modified, both internally and culturally, by appropriate incentives and censures.
Adjust the incentives, starting at the top. Once the US CEO’s are not making 350 times the lowest paid worker, inappropriate incentives will modify accordingly further down the line.
Enlightened self-interest is western culture’s ideal paradigm.
Let the enlightenment begin.
Roger, sounds more like socialism if you ask me.
Hi Rhonda,
An underwriter is told, “we’re changing the guidelines. I don’t care what your opinion is as to if this loan will default, approve the loan or there’s the door.”
What are this person’s choices? Not every person has the luxury of walking away from a good paying job.
Who really deserves to be fired? The underwriter, the underwriter’s management, or going up the chain…regional director…senior VP, President, CEO?
Do we license everyone? No.
In some states (including WA) some independent loan processors have to obtain a mortgage broker’s license.
Hi Rhonda,
An underwriter is told, “we’re changing the guidelines. I don’t care what your opinion is as to if this loan will default, approve the loan or there’s the door.”
What are this person’s choices? Not every person has the luxury of walking away from a good paying job.
Who really deserves to be fired? The underwriter, the underwriter’s management, or going up the chain…regional director…senior VP, President, CEO?
Do we license everyone? No.
In some states (including WA) some independent loan processors have to obtain a mortgage broker’s license.
Hi Roger,
LOs are (mostly all) paid on some form of commission: If the deal doesn’t close, then the LO gets nothing.
This is a step removed from a W-2 processor or underwriter collecting a salary not dependent on closed transactions.
The commissioned salesperson has the most to lose if the transaction doesn’t close and the most to gain when it closes.
How about we change the nature of the relationship between the LO and the consumer and reward the LO based on factors OTHER THAN if a loan is made?
Making the LO more accountable and pay the LO based on the higher duties owed to clients, and idea I proposed two years ago.
http://www.raincityguide.com/2007/05/11/subprime-solutions/
Paying LOs on commission keeps the system broken. I’d rather see LOs being paid by the hour, on retainer, whether or not a deal closes, with higher duties owed to the consumer.
Hi Roger,
LOs are (mostly all) paid on some form of commission: If the deal doesn’t close, then the LO gets nothing.
This is a step removed from a W-2 processor or underwriter collecting a salary not dependent on closed transactions.
The commissioned salesperson has the most to lose if the transaction doesn’t close and the most to gain when it closes.
How about we change the nature of the relationship between the LO and the consumer and reward the LO based on factors OTHER THAN if a loan is made?
Making the LO more accountable and pay the LO based on the higher duties owed to clients, and idea I proposed two years ago.
http://www.raincityguide.com/2007/05/11/subprime-solutions/
Paying LOs on commission keeps the system broken. I’d rather see LOs being paid by the hour, on retainer, whether or not a deal closes, with higher duties owed to the consumer.
Rhonda:
I don’t think it is socialism. I wasn’t suggesting the government mandate it.
I think it’s common sense. The ratio between top and bottom was not always so out of whack even in the US. Most small companies are not so out of whack either.
Inappropriate incentives often lead to bad outcomes.
Rhonda:
I don’t think it is socialism. I wasn’t suggesting the government mandate it.
I think it’s common sense. The ratio between top and bottom was not always so out of whack even in the US. Most small companies are not so out of whack either.
Inappropriate incentives often lead to bad outcomes.
If I remember correctly isn’t is June when all originators have to register on the national list list? That is no matter whom they work for.
I am seeing the same thing with originators in what I call a move to the middle. The smaller brokers are being both legislated and muscled out of business. The bigger banks are flexing some muscle and cutting compensation to their Loan Officers. People now are looking to move towards the mid-level bankers…..Companies like Mortgage Master, Seattle Mortgage, Cobalt, Golf, etc.
As a group, we are big enough to stay around but still have many of the flexibilities of the small brokers. Loan Officers in the middle aren’t just the faceless cogs in a huge machine that gets no choices. The big banks go through this every 5 years or so. It is the “We can do this because we are (insert big bank name here) and we don’t care”. Then they find the truth in the statement that, “if you pay peanuts, you get monkeys”.
They think it is their cycle now, I disagree.
Michael, I believe that there are different requirements for LO’s who work at depository banks and the rest of us with national licensing.
I also think, thanks to the internet and tools such as blogs, consumers are much savvier and want to have choices of who they work with.
Michael, I believe that there are different requirements for LO’s who work at depository banks and the rest of us with national licensing.
I also think, thanks to the internet and tools such as blogs, consumers are much savvier and want to have choices of who they work with.
As to Rhonda’s Comment 14. above- “I also think, thanks to the internet and tools such as blogs, consumers are much savvier and want to have choices of who they work with”- this is certainly true. However- not all this internet information is valid. Too much is disinformation- especially with regard to home design. J-
Jerry,
I agree with Jerry as to misinformation, but I think as to real estate and financial advices (vs. home design) that is because you can google a response from 3 years ago, that isn’t relevant today.
I notice and worry about this as to my blog where I can see someone Google for info on a certain topic, and that gives them a post of mine from May of 2006. My advice on that given topic might be quite different today, and I worry about spreading misinformation in areas were information is time sensitive.
Maybe “blogging” will evolve to the point where we are expected to review ALL previous posts, and update them to keep the info current and relevant at all times. Maybe not…
Ardell, keeping posts that I’ve written about mortgage guidelines “current” is impossible these days… entire posts may be lined out. I do try to post updates at the top of posts where information has changed.
I agree Rhonda. But there is no way for us to guarantee that people who google up a blog post, understand blogging. Just yesterday someone chewed me out for “saying something” I never said. Some people think everything under my post said by others…is said by me. Kind of funny, but true.
Rhonda, Ardell et al- As for me, I’ve always regarded blogging as an online conversation to which you have to listen and respond- on point. The fact that anyone can join in is both a strength and a weakness of blogging.
I agree with Michael.
No loan officer with any significant experience or book of business would be caught dead working at a big bank. All the LOs who couldn’t cut it when the refi’s dried up ran to the big banks looking for leads or back to the car lots and cell phone kiosks. Or…. gasp…. loan modification companies.
I think the remaining correspondents need to raise the bar though for new LOs entering the business as a group. While I do support comprehensive licensing, I just feel like it is way too easy to become an LO. It shouldn’t be a part time job. You should at least have a college degree. No other profession that deals with so much money as we do has such low standards of their employees and I think it is criminal.
I agree with Michael.
No loan officer with any significant experience or book of business would be caught dead working at a big bank. All the LOs who couldn’t cut it when the refi’s dried up ran to the big banks looking for leads or back to the car lots and cell phone kiosks. Or…. gasp…. loan modification companies.
I think the remaining correspondents need to raise the bar though for new LOs entering the business as a group. While I do support comprehensive licensing, I just feel like it is way too easy to become an LO. It shouldn’t be a part time job. You should at least have a college degree. No other profession that deals with so much money as we do has such low standards of their employees and I think it is criminal.
I know I would never work for a bank…NEVER. For one, odds are I would not be allowed to blog. 🙂