Capacity issues — in terms of the number of reliable bodies available to take mortgage loan applications — is a key reason why the loan brokerage sector will survive, attendees of the MBA convention in Atlanta were told Monday morning.
David Lykken, president of Mortgage Banking Solutions, added that the refinancing boom is causing a capacity crisis because many LOs are failing their state licensing exams.
Lykken believes 60% of LOs taking the new licensing test for the first time are failing it. And for those who pass, a fair number of them are failing the credit check, he said.
As a result, there is a crisis in the number of people who can take a mortgage loan application, Lykken said.
Therefore, the mortgage broker is needed to fill in the gap, he said. While Bank of America pulling out of wholesale last month "scared the daylights" out of the mortgage broker community, this segment of the industry is resilient.
However, mortgage brokers will get squeezed on margins, resulting in them carrying the same amount of risk for a whole lot less income, he believes. The wholesale channel will survive "out of necessity," he concluded.
