Florida Mortgage Brokers Square Off Against Lenders
Florida mortgage brokers and lenders may be headed for a standoff.
The housing slump, now in its second year, is testing alliances between the two, who have become more mutually dependent as the competition for borrowers has intensified.
A particular point of contention is the increase in bad loans returned to lenders for refund, putting many out of business and leading others to spread risk to brokers who thought themselves immune.
Lenders have been telling brokers to make good on contracts that previously had been ignored, or are refusing to soften contract language that had allowed brokers to wash their hands of responsibility after a Florida mortgage is closed, brokers said.
About two-thirds of mortgages flow from brokers, according to research firm Wholesale Access.
Lenders in the past few years have increasingly used brokers to match them up with customers. Brokers typically have at least 10 lenders they go to for quotes for a potential borrower. When a loan closes, the broker earns a fee or a slice of the loan’s profit.
“I’ve seen cyclical swings before but I haven’t seen them (lenders) going after the brokers,” said Eric Weinstein, chief executive officer of Centreville, Virginia-based Carteret Mortgage Corp., one of the nation’s largest privately held brokers.
The broker says he’s been rejecting contracts offered by wholesale lenders that require he buy back loans with any inaccuracies or that go delinquent during the first year. In the past, brokers could agree to buy back loans only in cases of known fraud.
Carteret is rejecting one in every two contracts today, compared with one in 20 a year ago.
The change in the broker-lender relationship is the latest illustration of finger-pointing over who’s to blame for the bad credit Florida mortgage meltdown that has exacerbated the housing downturn and hurt the entire $10 trillion market. The heads of two main U.S. mortgage organizations - the Mortgage Bankers Association (MBA) and the National Association of Mortgage Brokers (NAMB) - have traded insults on the issue.
John Robbins, chairman of the MBA, last month said “unethical” people - including “short-term folks” who care about the commission and not the loan - have given the industry a black eye.
NAMB President Harry Dinham later said Robbin’s comments were “truly unfortunate” and that the MBA was trying to shift blame away from banks and Wall Street, which buys loans and packages them into securities.
Lenders, forced by Wall Street investment banks in the past year to buy back billions of dollars in bad loans, claim they already had tough contracts with brokers.
The meteoric rise in loan repurchases due to poor underwriting and dormant housing markets has dented profit at lenders - including Countrywide Financial Corp. and Washington Mutual Inc. - and has left them looking for ways to reduce liabilities going forward, analysts said.
“The problem is that all this is being forced down on them from Wall Street,” said Douglas L. Davies, a Seattle-based lawyer who represents lenders and brokers.
SOURCE: Reuters
August 10th, 2007 at 9:56 pm
There needs to be legislation passed to penalize these loan sharks monetarily and also criminally for their actions. These slimy brokers who prey on young families that don’t have the best of credit. Now, they are going to have their credit ruined plus have a foreclosure on their records. These people went deeper in debt on credit cards to pay their exorbitant escalating adjustable rate morgages.
Corporations can declare bankruptcy, but now these poor families cannot even declare bankruptcy to get free. President Bush passed the new bankruptcy laws to help help his friends in the Credit Card and Healthcare Industries. Now these unscrupulous lenders can declare bankruptcy and walk away scot free, while some families will children become homeless.
Why do the working poor have to subsidize the tax base in the US? Why are we letting people stay homeless and starving? Why do so many people worship money and not care about their fellow man? The future of mankind is in jeopardy; foreclosures of homes is just one symptom. US goverment has stolen our rights, and have all the power. And what is sad is that we let them. Where are the protesters of the 60’s when you need them? Why aren’t Americans angry?