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There has been a lot of furor over my “Dead Man Walking” post which outlines my opinion that mortgage brokers are marching towards extinction. It was written a week before Bank of America pulled the plug on their wholesale lending channel; and today a friend of Blown Mortgage lets us know that another bank has pulled out of wholesale.
It’s with a great degree of sadness that I need to inform you that First Bank has decided to cease their Wholesale Operations (retail in other locations are unaffected by this decision) effective Wednesday, October 31st. This past Friday, the 26th, was our last day to receive loan submissions.
It has been a great ride but as many great rides go…… this one has come to an end.
Hopefully our paths will cross again. Until then take care and thank so much for all your business over the years.
I don’t know the size or scope of First Bank’s wholesale operations; but it is just another example of lenders putting more faith in the retail channel and abandoning the wholesale side altogether.
As a mortgage broker I’ve been following your articles with much interest. While I believe there will be a contraction in the channel, I believe it will survive. However, if Countrywide and Wamu fall, I may have to rethink.
There will still be a number of very lean wholesale only, agency brokers, and some of the portfolio lenders.
Eventually, there will again be an appetite in the secondary market for non-agency loans, and the fastest way to scale is wholesale. One thing is clear. Events on the ground are happening at such a rapid pace that I expect to see who will still be in the game in the next few months.
I have to agree with Paul. I have been in mtg. lending for 25 years and wholesale lending has made the industry a much more dynamic and competitive industry than it would have been if just banks were doing all the lending.
After the refi business went away in 04 there were to many lenders, especially subprime, chasing to few deals. And many news article fail to put the current mortgage industry’s problems in prospective. When the media reports a forclosure rate of 15 to 20% they fail to explain the 15 to 20% is subprime business which makes up about 10% of the 1.5 trillion mortgage market. This means about 80% of those subprime mortgages are still performing, loans which would never have been done in the early 90’s.
Michael, while I agree with Paul that wholesale will exist in a more limited role, I’m not sure I’m sold on your math. If 80% of subprime loans are still performing there is no way that the credit crunch is affecting us the way it is. I’ll take your word for it now; but I’d like to have a closer look at the numbers.
Morgan, the numbers, I used were from an industry news paper about month old. It may be a little higher now, but not all subprime is in default. Of course there is some spill over on the A side of the world with the option arm products. 100% financing was a very bad idea, regadless of your credit score.
The real problem is the lack of confidence investors ( foreign banks, hedge funds, insurance companies, etc.) have because they don’t know how many of these problem loans they actually own within these collateral Debt Oblogations (CDOs). Because of this they don’t know the actual vaule of these investments. And because of that they have had to adjust the amount of reserves they are required to have on hand, and best to error on the conservative side. This is part the reason there is a liquity issue.