Loan officers working for nonbank lenders and brokerage firms are an unhappy lot these days. Not only do LOs face depleted earnings prospects thanks to a pending Federal Reserve rule on compensation, but they're looking at higher licensing costs, and fewer choices in the secondary market as wholesalers ponder their future in the sector.
Ask any LO what gripes them the most, and the Fed's compensation rule will be at the top of the complaint list. But a close second will be the lack of parity they have with LOs working at federally insured banks and thrifts.
Bank LOs (as noted in past columns) are exempt from state testing requirements, which means they don't share this expense with their nonbank competitors.
Meanwhile, new figures show that in some states the number of nonbank LOs is dropping. In Colorado, for example, as of Jan. 19, there were 3,614 licensed and approved loan officers, a 25% decline from just two weeks earlier. The drop comes despite booming loan applications in the fourth quarter.
At this point, the exact reason for the decline is unclear, but Bill Kidwell, a former state trade group official who now runs IMMAAG, thinks the reduction in numbers is due to LOs from nonbanks and brokerage firms either not passing the SAFE Act test, or deciding not to re-register with the state for 2011.
Kidwell said that although the decline in LOs might look dramatic, there's an upside for the survivors. "They'll be getting increased market share," he said.
Still, it's not cheap being a broker in the state. Until recently, the Colorado license renewal fee was $298 for three years. Today the cost is $915 for three years.
On a national basis, we won't know for several weeks what the big picture is, until all the states report their numbers. According to Bill Matthews, president of the mortgage division of the Conference of State Bank Supervisors, the number of nonbank LOs is down roughly 50% from the peak. "That's just a ballpark number," he said.
Marc Savitt, a past president of the National Association of Mortgage Brokers, believes that up to 70% of LOs have either quit the business or lost their jobs over the past three years. "I think a lot of people are taking the attitude of 'Why should I take the test? The biggest banks already control 90% of the business.'"
Savitt, who runs a small brokerage firm in West Virginia, isn't a fan of the Fed's LO compensation rule and is considering mounting a legal challenge to it. (He also heads a small trade group called the National Association of Independent Housing Professionals.)
The former NAMB chief thinks several state regulators will soon realize how much in tax revenue they're losing because of the dwindling number of license renewals. "I don't know if all this is being taken into consideration by the states," he said. "Do they know they'll be losing revenue?"
Matthews of CSBS said he has heard about the revenue loss concerns, and concedes that it may be an issue for some states. "It's not always so simple to just to hike fees," he said.
