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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> February 1, 2009
Mortgages
Banks Bypassing Mortgage Brokers
By BOB TEDESCHI
MORTGAGE brokers have long served as an important loan source. Compared with the loan officer at a local bank, brokers typically offer a wider range of mortgage products from a variety of lending institutions.
But now some brokers are concerned that they might become marginalized, as some of the nation’s largest lenders move to block them from offering their loans.
The banks argue that the action reflects a move toward more conservative business practices, but brokers complain that they are being made scapegoats for the credit crisis, and that consumers will suffer as a result.
“Borrowers are going to have fewer choices because the industry is removing the element of competition,” said Richard Biondi, the president of the New York Association of Mortgage Brokers. “Banks are one by one knocking us out of the box.”
Mr. Biondi, who is also an independent financial consultant and mortgage broker in Farmingdale, N.Y., said the most recent example of this trend was a change in policy last month by JPMorgan Chase. It will no longer accept loan applications processed by mortgage brokers.
The bank, which had in recent years been among the biggest lenders of mortgages originated by brokers, said that it would instead accept only loan applications taken in its retail locations and online.
Mr. Biondi said he had relationships with about 15 lenders, but usually made loans on behalf of four or five. The disappearance of Chase, he said, will force him to look to smaller, community-based lenders, which sometimes charge higher interest rates.
A JPMorgan Chase spokesman, Thomas Kelly, disputed Mr. Biondi’s claim that Chase’s policy shift would ultimately hurt consumers. “We are making decisions about the best way to make loans that will be good for borrowers in the long run,” he said.
Chase’s business has also changed, he noted. The bank had just 600 branches five years ago, but through mergers and acquisitions and the opening of new branches it has grown to more than 5,000, so Chase can rely less on brokers to distribute its loans.
In addition, Mr. Kelly cited an internal memo sent to employees on Jan. 13, in which executives wrote that mortgages made directly through Chase employees have lower default rates than those made through brokers. Mr. Kelly declined to elaborate further on the memo.
Some legislators and consumer advocates have criticized brokers specializing in subprime mortgages — loans typically offered to borrowers with less-than-stellar credit ratings. They charge that some brokers persuaded borrowers to apply for loans that were beyond their ability to repay.
But mortgage brokers say they have been unfairly blamed for the industry’s failures in recent years. They point out that it is the lenders, not brokers, who ultimately approve a borrower’s application.
John A. Courson, the president and chief executive of the Mortgage Bankers Association, a trade group based in Washington, said that brokers would continue to remain an “important part of the mortgage delivery process.”
Mr. Courson acknowledged, however, that lenders have had concerns about the business practices of some brokers, and that the pressure on brokers could continue.
Lenders, he said, want to do business with financially secure mortgage brokerage firms that have more of a personal stake in the success or failure of the loans they make. Only those firms with a net worth of at least $63,000, for instance, can offer Federal Housing Administration loans. But Mr. Courson said that the Mortgage Bankers Association was pushing to raise the threshold to $150,000.
Lenders have agreements with brokers that enable them to demand compensation for bad loans. The more capital a brokerage firm has, the more likely that it will be able to compensate the lender.
If implemented, such a policy could further impair an industry in which brokers have gone out of business by the tens of thousands in the last two years.
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http://www.nytimes.com/2009/02/01/reales...agewanted=print
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> February 1, 2009
Mortgages
Banks Bypassing Mortgage Brokers
By BOB TEDESCHI
MORTGAGE brokers have long served as an important loan source. Compared with the loan officer at a local bank, brokers typically offer a wider range of mortgage products from a variety of lending institutions.
But now some brokers are concerned that they might become marginalized, as some of the nation’s largest lenders move to block them from offering their loans.
The banks argue that the action reflects a move toward more conservative business practices, but brokers complain that they are being made scapegoats for the credit crisis, and that consumers will suffer as a result.
“Borrowers are going to have fewer choices because the industry is removing the element of competition,” said Richard Biondi, the president of the New York Association of Mortgage Brokers. “Banks are one by one knocking us out of the box.”
Mr. Biondi, who is also an independent financial consultant and mortgage broker in Farmingdale, N.Y., said the most recent example of this trend was a change in policy last month by JPMorgan Chase. It will no longer accept loan applications processed by mortgage brokers.
The bank, which had in recent years been among the biggest lenders of mortgages originated by brokers, said that it would instead accept only loan applications taken in its retail locations and online.
Mr. Biondi said he had relationships with about 15 lenders, but usually made loans on behalf of four or five. The disappearance of Chase, he said, will force him to look to smaller, community-based lenders, which sometimes charge higher interest rates.
A JPMorgan Chase spokesman, Thomas Kelly, disputed Mr. Biondi’s claim that Chase’s policy shift would ultimately hurt consumers. “We are making decisions about the best way to make loans that will be good for borrowers in the long run,” he said.
Chase’s business has also changed, he noted. The bank had just 600 branches five years ago, but through mergers and acquisitions and the opening of new branches it has grown to more than 5,000, so Chase can rely less on brokers to distribute its loans.
In addition, Mr. Kelly cited an internal memo sent to employees on Jan. 13, in which executives wrote that mortgages made directly through Chase employees have lower default rates than those made through brokers. Mr. Kelly declined to elaborate further on the memo.
Some legislators and consumer advocates have criticized brokers specializing in subprime mortgages — loans typically offered to borrowers with less-than-stellar credit ratings. They charge that some brokers persuaded borrowers to apply for loans that were beyond their ability to repay.
But mortgage brokers say they have been unfairly blamed for the industry’s failures in recent years. They point out that it is the lenders, not brokers, who ultimately approve a borrower’s application.
John A. Courson, the president and chief executive of the Mortgage Bankers Association, a trade group based in Washington, said that brokers would continue to remain an “important part of the mortgage delivery process.”
Mr. Courson acknowledged, however, that lenders have had concerns about the business practices of some brokers, and that the pressure on brokers could continue.
Lenders, he said, want to do business with financially secure mortgage brokerage firms that have more of a personal stake in the success or failure of the loans they make. Only those firms with a net worth of at least $63,000, for instance, can offer Federal Housing Administration loans. But Mr. Courson said that the Mortgage Bankers Association was pushing to raise the threshold to $150,000.
Lenders have agreements with brokers that enable them to demand compensation for bad loans. The more capital a brokerage firm has, the more likely that it will be able to compensate the lender.
If implemented, such a policy could further impair an industry in which brokers have gone out of business by the tens of thousands in the last two years.
</div></div>
http://www.nytimes.com/2009/02/01/reales...agewanted=print
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