It appears that independent loan brokers are ever-so-slowly rebuilding their production market share, but don’t for a minute think that this embattled sector is getting any more respect among regulators and politicians.
Even though the housing market is nearing (or reached) a bottom (thanks to absurdly low rates) brokers continue to face public criticism for their role in the mortgage crisis. The general perception among Washington regulators and policymakers is that brokers caused the housing crisis because they jammed a bunch of bad loan products down the throat of poor, unsuspecting borrowers.
And let’s state the obvious: the general media has yet to do any type of story on how applicants deluded themselves by purchasing homes they knew they couldn’t really afford.
Of course, anyone who’s worked in mortgage banking for than four years knows that the “Broker Is Evil” story line is both absurd and naive. But let’s state the obvious: brokers played a role in the crisis—for sure. They were on the front lines with the consumer, selling payment-option ARMs and encouraging borrowers to take out larger loans than they needed. But not all brokers engaged in such devious behavior and it can be argued that those left standing today are not only the “good guys” but they’re educated, licensed, and registered, which is something that’s not required of all bank loan officers.
Two weeks ago Marc Savitt, president of the National Association of Independent Housing Professionals, blew his stack when CFPB deputy director Raj Date made a speech to a banking group, laying blame for the mortgage crisis (in part) on brokers. “If a borrower could qualify for a loan at, say, 6%, a broker might juice that rate up to 8%,” Date told an American Bankers Association conference in Florida.
A few days later, NAIHP, a small trade group that represents brokers and appraisers, publicly called for Date to resign, saying he’s biased against brokers.
Date, though, is going nowhere. (When’s the last time a trade group of any type called for the removal of a regulator and it actually happened?)
The problem with the brokerage sector is that its history is both problematic and misunderstood. Also, brokers have no pull in Washington because politics is a game of money and NAIHP is a side gig for Savitt, a working Virginia broker who operates the group on a shoestring budget. The sector’s other trade group, the National Association of Mortgage Brokers, is a shadow of its former self with a small staff and no permanent office space.
It might be said that brokers really don’t have much of a fighting chance in Washington unless they’re persistent and can open the right doors.
But how do you educate a town where it has long been forgotten that the largest subprime-related legal settlements in U.S. history involve retail lenders the likes of Ameriquest, Household Finance and Associates First Capital Corporation? (And who owned Household and Associates? Answer: Big banks, HSBC and Citigroup, respectively. And who eventually bought Ameriquest/Argent? Answer: Citi.)
Regarding the 2005 $325 million AG settlement with Ameriquest, Iowa attorney general Tom Miller vowed to look at Ameriquest’s wholesale division, Argent, but nothing ever came of it. Does that mean all the damage was done in the retail unit?
Meanwhile, brokers are scared that their ability to make a living will be further damaged by pending compensation regulations at the Consumer Financial Protection Bureau.
Now that Savitt has called for Date to resign, that door may be closed to NAIHP, but Date likely will dismiss the matter as something done in the heat of, shall we say, dismay. After all, regulators are supposed to be reasonable. And as the CFPB continues to draft new regulations governing both brokers and depositories—and holds public forums on these rules—will it contemplate the big question: Will consumers be better served by having no loan brokers and nonbank lenders out there?
