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Special Reports
Broker or Banker: Is a Step
Up Right for You?
'More Candidates Despite RESPA Reform's Pause'
There are a lot of new warehouse line providers.
By Brad Finkelstein
NEW YORK -- The conversion of mortgage brokers to mortgage bankers was one of
the areas expected to be hit hardest as a result of the pause in the Real Estate Settlement Procedures Act reform
effort.
Yet, according to a pair of experts in the field, they are seeing more serious
candidates for making the move up.
The experts are two warehouse lenders that provide mortgage brokers with their
first lines of credit.
According to Jeff White of the Placentia, Calif..-based National Mortgage Capital
Corp., "With [loan origination] volumes down, people are looking to become more relevant competitors in the
market place."
To be a mortgage banker, he said, takes a commitment to raising capital.
While the number of calls seeking information about becoming a mortgage banker
has declined, those calling in "are coming from a different, more genuine direction," Mr. White said.
While the main regulatory threat has gone away, many of the traditional reasons
for making the switch remain.
Correspondent mortgage bankers do not have to disclose their fees (because the
loan sale is considered a true secondary market transaction under the Department of Housing and Urban Development
definition) and traditionally correspondents get better pricing, he noted.
In addition, being a mortgage banker helps when seeking out Realtor referral business
and when looking to recruit the higher-quality loan officers, Mr. White added.
Lyn Merkle of First Collateral Services, Concord, Calif., added that many people
thought that Real Estate Settlement Procedures Act reform was the driving force behind the interest in making the
move up.
While that might have motivated many people to look into the move, he hasn't seen
many people back away from making the conversion.
He also cites the decline in originations as a reason for people looking to make
the conversion, but Mr. Merkle comes at it from a different angle.
As originations have fallen, companies have laid off people or closed up shop
entirely.
This has led to an increase in the number of staffers available who have the right
skill sets (such as the ability to manage a warehouse line) available, he said.
Agreeing with Mr. White, Mr. Merkle noted competitive pressures will lead many
mortgage brokers to want to "put their own stamp on it," noting that as a mortgage banker, the documents
are in their own name.
Being able to close the loan themselves is a way to distinguish themselves in
the marketplace, he said.
As for the state of the market today, Mr. White said he is seeing an increase
in demand for subprime loans from investors and subprime lines of credit from originators.
There are a lot of new entrants in the warehouse business, including subprime
giants Option One, NovaStar and New Century.
On the correspondent side, Mr. White is seeing new investors for subprime mortgage
loans.
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