CMP: How tough is it now for U.S. mortgage brokers running their businesses?
JP: The major problem brokers have right now is the underwriting has become so strict that so many people cannot qualify for loans. It makes it very difficult. And the mortgage insurance companies, where in the past you were able to do high-ratio loans up to 95 per cent and get them insured, they're struggling and [now] they have raised their requirements from 720 to 740 credit scores before they'll even think about insuring a high-ratio loan. It''s harder for the consumer to understand that they cannot get the 95 per cent [LTV] conventional loan.
That's the reason the Federal Housing Agency''s (FHA) role has increased from around eight to 10 per cent five years ago to almost 40 per cent of total originations now because it has a minimum down payment of 3.5 per cent. More and more of the loans are going to the FHA, as we cannot service the consumers with the high-ratio loans unless we do it through the FHA.
The frustration is not being able to get a consumer qualified just because there's one little thing that really shouldn't play much of a factor in whether he has the ability to pay the loan. The pendulum has swung that far.
CMP: Is the mortgage broker market at the bottom of the cycle? For instance, are you expecting more members to join NAMB next year?
JP: I think so. One of the good things right now is that there is something we've advocated for a number of years - national licensing of all [mortgage] originators. We were not able to get the banks included but mortgage bankers were. We''re going through a period now where [mortgage originators] have to have 20 hours of education and take a test, so education has become a key recruiter, you might say, for NAMB.
RD: You've got the five distribution channels out there - the banks, the credit unions, the federally chartered entities, state lenders and the mortgage brokers. For the lenders and the mortgage brokers, they're going to be tested, have education and have background checks. Now you have one channel, the banks, that don't do that. It''s actually a very good competitive advantage - is there a risk going to a bank, where that person didn't pass a test, they don't have the educational requirements, they didn't have to submit their fingerprints for an FBI background check? Why would you want to go there when there are other channels that have all these protections for you?
CMP: Your conference had a strong marketing and selling focus. What do you hope brokers take from your conference?
JP: It comes back to my philosophy that brokers are now going back to the things that we [once] did. We had to be innovative, creative and we had to learn how to market. We''ve kind of forgotten some of this. What we hear from the members is we need help in relearning some of this, and getting back so we can be more creative.
CMP: You included a "speed dating" session with lenders. What is product knowledge like amongst U.S. brokers?
JP: Speed dating is something we started in Texas. Some of the [NAMB] chapter heads did these three or four years ago, and they went over [well]. And it''s just a matter of having face-to-face with different lenders. Maybe taking a file you have and getting their input what''s going to be the best way of making it work out. You can do stuff like that. It gives the lender and the broker the opportunity to have a lot of good face time together, and create a relationship that will go beyond this conference.
CMP: In 12 months' time, what would you hope you've achieved as an organization?
JP: That we've been able to protect our industry, and make sure that there are not laws or regulations which are overreaching and force us out of business. Two, I think we're going to see membership increase. The people that are remaining right now are truly professional brokers - we've survived the last two years, and if we can survive one more year there''s going to be a great opportunity. Real estate and mortgages will be back, there''s going to be fewer brokers then there were about five years ago. The ones that are here are truly professional brokers, and will be able to take advantage.
CMP: If you could pinpoint what makes for a good broker, what are some of the traits they would have?
RD: I think going forward, the value-add for a broker now is going to be stepping back and asking, what are the advantages for the consumer to use a broker versus taking a crapshoot at whatever bank to get a loan. The problem for the consumer is, they don't know for sure if bank A has a program that the consumer will fit into. The value-add for a broker is, he has got what Bank A, B, C, D and E has, and he knows that if you''re a clean-as-a-whistle borrower with good credit, that's the [bank] to go to. The broker's value is to send you to the lender that one time that''s going to close that deal. Mortgage brokers are going to be more valuable in the future because of all the things the entire market has gone through. A broker will have more expertise, so when that loan file is ready to go, it goes to the right bank the first time.
JP: Brokers are very patient. It takes time to find out what the consumer needs, and to put the package together for that lender so it can get through. We''re willing to take the time to work with them, go through the steps, so you need to do this, this and this in order to be here. And you don''t find that through other channels of [loan] distribution.
RD: The value-add for brokers for the entire market is lenders are able to tap into a lower-cost distribution [channel]. It's like they can turn that valve up on that channel to handle the increased demand. If you did the math and said, ''you know what, let's get rid of the mortgage broker channel,'' that would be okay for maybe six months but as soon as there's any kind of uptick in the market on refinances or purchases, the capacity of the banks wouldn't cope. All the distribution channels know you have to have the mortgage broker.
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