Earlier this year the Federal Reserve installed new regulations governing how loan brokers can be compensated – and the results are in: the broker/wholesale market share fell to 6.9% in the first quarter, the lowest reading ever recorded by National Mortgage News and its affiliate, the Quarterly Data Report.
Although the broker/loan officer compensation rule did not become operative until early April – after failed court challenges from two trade groups – some brokers decided, ahead of time, to get out of the business or shift over to working for a depository or mortgage banking company, said Marc Savitt, a past president of the National Association of Mortgage Brokers.
“Some people got out of the industry in anticipation of the rule,” said Savitt, a West Virginia-based broker who also runs a small trade group called the National Association of Independent Housing Professionals. “What happened is what we said would happen: the Fed has decimated an entire industry.”
Over the past four years, the broker share peaked at almost 30% in the second quarter of 2007, a time when nonprime table funders relied heavily on the sector.
NMN/QDR found that although the broker share declined precipitously from 4Q (when the reading was 10.7%), some firms are increasing their participation in the channel. U.S. Bank Home Mortgage, for instance, grew its table funding volume by 11% in 1Q to $3.3 billion, while Union Bank, San Francisco, doubled it. (For expanded analysis see the Monday, paper version of NMN.)
