Reverse mortgage brokers get a new glass

The national trade group representing mortgage brokers hews to the well-worn saying about the glass containing half its total capacity. Depending on how you view the new government net worth requirements, strengthened lender approval criteria and greater lender liability for the practices of their correspondents, it’s either half good or half bad.

“Brokers who possess warehouse lines and small banks are impacted more negatively since they may no longer close in their name,” says John Councilman, treasurer for the National Association of Mortgage Brokers and president of AMC Mortgage Corp., a brokerage and lender operating in Maryland, Pennsylvania and Florida. The 25-year-old company originates all types of loans including FHA, conventional, USDA and reverse mortgages. “It will simply give brokers less flexibility in pricing their loans and assisting borrowers,” he adds.

As it relates to the reverse mortgage sector, Councilman says “there is a lot good about the change from mini-Eagle to sponsored originator. Small companies no longer are required to have audited financial statements or cash-on-hand requirements inappropriate to their needs.” However, he points out that “brokers will need to work more closely with their sponsors to obtain case numbers and pre-select the intended lender. Those could be negatives for the broker and the borrower.”

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Ultimately the new broker-aimed government guidelines help one interest group, according to the NAMB treasurer, who believes “the real winners are the large banks and those who purchase loans from them.”

Joshua B. Shein, managing partner, Great Oak Lending Partners, says “everyone is stressed out” about the coming changes. “There is a lot of uncertainty and some brokers are trying to decide whether to make a move or wait and see how huge the changes will be. It’s anyone’s guess what will happen,” according to Shein.

Meanwhile, the federal Bureau of Labor Statistics had some good news for the industry. The number of active mortgage brokers rose in October by 900 from September to 59,500, driven by the surge in refinancings that started in early fall.

Written by Neil Morse

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  • Reverse mortgage brokers get a new Glass! That is a new way to look at it. Yes, there is some good out of the new change. However, in my opinion I see the bad out way the good.

    Many brokers that operated as independents and built their businesses with the sweat of their labor have had their legs cut off. many of these brokers took their companies, started out just originating and processing, then graduated up to underwriting their product to establishing their own warehouse lines. They also had the ability to control the level of service they gave their clients. Many of these same brokers/lenders had their own wholesale department besides retail. It is all gone for many of them, years of hard work to obtain their dream, gone!

    They are now just a broker again, depending on the big giant. Well my friends, look around, many of these companies are closing their doors. People you and I know that were Presidents of medium size companies are resorting to taking origination jobs with the giants that will be dominating our industry and maybe the entire mortgage banking industry one day..

    I see happening what we all saw coming. The large bank and servicer dominating the industry. I even see in the future the large financial institution controlling lending, banking and our entire financial world. I also see the Federal Government having some form of ownership interest in these large financial institutions.

    I am sorry, I do not see the Glass half full. This is just another planed move by the Federal Government perpetrating their power on the industry and the American people. Just one more step toward government control and socialism. As far as the increase in mortgage brokers across the country, this is not only temporary but the complete facts are not being told in this article. Besides, no broker or business can survive on just the refinance wave!

    I realize what I am saying is very bold on my part, so be it. However, I can’t sit back and watch what is happening with out speaking out! I may not be doing a darn bit of good by speaking out but I am not going to have my head buried in the sand. I will fight and I will speak out loud where ever I have the opportunity to do so. I write letters to congressman and senators daily, fighting the financial regulatory reform bill and issues like these. The reverse mortgage industry is a great industry, we as a team have done so much good for our seniors. We as a group, can’t let this benefit of direct personal service along with the product itself disappear for our seniors.

    Thank you all,

    John Smaldone

  • Right, this change helps the big banks only. No net change to the consumer, in fact rates / prices will probably rise since competition will be reduced for the banks. Obviously their lobbyists were successful on this one.

  • The first issue the industry must face is the size of HUD to handle the immense volume increase in mortgages it now oversees. Its budget increases have not kept up. The percentage of HECMs our own industry would need by now was projected to be less than 20% of our entire activity less than 36 months ago. The situation in the mortgage industry is much different than anyone imagined not that many years ago.

    Is the situation nothing more than a government/business cycle? Our industry brokers have never prepared for a “reversal of fortunes.” In 2007, I watched a reverse mortgage broker with a business worth well in excess of $5,000,000, fail to mind the store and let the value of that business begin to slip away from him even before the downturn in home values.

    Many industries go through regulation tightening and loosening. The FCC and the radio industry are a prime example. In that industry, the reduction in stations is achieved through buyouts by the larger entities. Some of the wealth generated through consolidation is passed on at the beginning of the cycle.

    The brokers in our industry have yet to find a way to transfer equity ownership so as to maximize value. Those who are good business people will find a way to exploit their operating profits. There are exceptions and Seattle Mortgage stands out as one of them.

  • The first issue the industry must face is the size of HUD to handle the immense volume increase in mortgages it now oversees. Its budget increases have not kept up. The percentage of HECMs our own industry would need by now was projected to be less than 20% of our entire activity less than 36 months ago. The situation in the mortgage industry is much different than anyone imagined not that many years ago.

    Is the situation nothing more than a government/business cycle? Our industry brokers have never prepared for a “reversal of fortunes.” In 2007, I watched a reverse mortgage broker with a business worth well in excess of $5,000,000, fail to mind the store and let the value of that business begin to slip away from him even before the downturn in home values.

    Many industries go through regulation tightening and loosening. The FCC and the radio industry are a prime example. In that industry, the reduction in stations is achieved through buyouts by the larger entities. Some of the wealth generated through consolidation is passed on at the beginning of the cycle.

    The brokers in our industry have yet to find a way to transfer equity ownership so as to maximize value. Those who are good business people will find a way to exploit their operating profits. There are exceptions and Seattle Mortgage stands out as one of them.

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