The National Association of Mortgage Brokers reached a turning point at its recent NAMB/West conference in Las Vegas.
Just prior to the conference, Bill Howe, who had been serving as the group’s president, resigned due to ongoing health issues. Stepping up from president-elect is Michael D’Alonzo.
Then NAMB said that Roy DeLoach, who had been the chief executive and government relations chair, left the organization to join a newly formed lobbying firm, DC Strategies Group. However, DeLoach will remain active with NAMB as the organization has contracted with DC Strategies as its representative. This seems to be the culmination of a total revamping of the organization as previously, NAMB had moved to a virtual office structure.
The Federal Reserve Board’s loan officer compensation rule has become a rallying point for the organization. Immediately after Election Day last year, the group did a viral video as part of a petition drive calling on the Fed to withdraw its rule.
NAMB has shrunk to approximately 5,000 members. But the organization noted that 3,000 people signed the petition in the days after the video appeared on YouTube. Supporters say that shows the need for NAMB to remain in existence.
At the Las Vegas show, Origination News senior housing correspondent Lew Sichelman sat down with D’Alonzo, DeLoach, new president-elect Don Frommeyer, secretary Ginny Ferguson, treasurer John Councilman, government affairs chairman Mike Anderson and immediate past president Jim Pair, to discuss the future of the organization and the mortgage broker business in general.
SICHELMAN: Based on what I am hearing here, NAMB is not finished fighting, are you?
FERGUSON: Not just no, hell no!
D’ALONZO: We’ve had some bumps in the road and we’ve corrected the bumps in the road. We’re working through a lot of the issues, but we feel that we are going to be in a good position moving forward. We’ve streamlined our operations; we’re at the point where I think we are lean and mean and we are now built to survive.
SICHELMAN: What are your members doing to survive?
D’ALONZO: Most people that have stayed in this business are in it for the long haul. They have learned how to adapt. When the new good-faith estimate first came out, everybody was saying how are we going to get used to it. But everybody is used to it now. We’re working within the constraints of the GFE. The good mortgage professionals are what are left and they are taking advantage of the lack of competition. No doubt competition has dropped, rates are low, so business is out there for the ones that are left.
FERGUSON: I think it is a constant monitoring of new guidelines, new rules that each of the wholesalers they are dealing with have. On the West Coast, we have had a couple of big lenders that have suddenly decided to change how they want page 1 of the GFE completed, based on whether your loan is locked or not locked. We don’t put dates in, we put non-applicable in. It’s a constant monitoring that somebody within each of the companies has to do, whether that is the broker, the owner, an assistant that is in charge of guidelines, or whoever that might be. I agree with Mike, the professionals are here and they know what they have to look for and that is what they are doing. But I think everybody has gone back to basics, understanding you have to get out there and you have to be present at your local boards, at various civic meetings and things like that. All the stuff we did back in the dark ages to generate business. It is not all going to walk in the door or come to you off of the Internet.
FROMMEYER: Our members are starting to have a trust factor, knowing that we are up on the Hill fighting to try to help them. The work that Roy and Mike (Anderson) have been doing on the Hill, especially with the videos getting out there, I think we’re starting to put a face on exactly what we are trying to do. They see we are fighting for them and I think that motivates them to continue what they are doing to close their loans. We’re starting to see an increase in membership in some states. It seems like every time Mike (Anderson) puts out one of his Web things, they start to understand what is going on. That motivates them; they see we are fighting for them.
SICHELMAN: Are mortgage brokers getting out the business totally? Are they going to work for banks?
COUNCILMAN: I think a lot of people thought that going to work for a bank was going to solve all of their problems. After going around and talking to a lot of the people that have joined banks, they are not so sure of that right now. They are finding that banks are deciding that it is best to put somebody on a salary. People aren’t used to being a salary. They’re more interested in working under commission if they are a very talented loan officer. I think the mortgage brokers still have a lot to offer because we have flexibility. We can adjust our overhead very quickly.
SICHELMAN: How about mortgage brokers merging?
COUNCILMAN: We have had licensing come into being. If you are serious about the business, you go ahead and get licensed. And there is a lot to it. So you have situations where people are having to put out a lot of expense, a lot of energy and a lot of time and you’re not going to do that if you’re not dedicated to this industry. So the people that are hanging out today are tough, whether they go with a couple of brokers getting together, whether they become a man shop. These people are dedicated because they’ve gone through a lot. They are not about to turn around and do something else. They are going to fight to stay what they do well.
FERGUSON: I know out on the West Coast there are a couple of companies that are trying to form coalitions of brokerage firms. We’ve seen that over the years, where economies of scale—you put three or four companies together and they got more buying power, etc. Most of those in the past have failed or ultimately ended up as one company. It is going to be time as to whether we see that model be a viable model going forward. NAMB is reflective of the industry at large. The industry at large has shrunken dramatically. But that is not a bad thing because the bulk of the people weren’t in the business five years ago. They came flooding into the industry because there was a lot of fast money, so they thought, to be made. They didn’t have to have any skills. Those people are gone and that is a good thing, not only for our industry, but it is a good thing for the consumers.
SICHELMAN: Fannie Mae did an economic outlook here and one of the things I took from that was patience, that this business needs to have patience because it is still going to be a while before there is any perception the market has improved. Do you have the patience?
D’ALONZO: Of course. All of us in the room have been in the industry for a long time; I think all of us are 20 years plus in the business. Because of that we have seen ups and downs, not quite as severe as this last down, and it is about patience. It is about understanding that with every dip there is a rise and we’re not going to be at this nadir forever. We’re going to be in an upswing and it is going to happen soon.
DELOACH: There is some activity going on, but there are a lot fewer fishing poles in the water. So you are really finding a lot of folks are very busy, they are swamped basically. There are folks that are retooling, basically creating de novo entities. They don’t have any legacy problems. They are starting to redesign the way mortgages are pulled into the market, doing a lot of quality control up front instead of totally at the end when it is too late. I see the market shifting into a barbell effect, with all the changes going on, the middle market lenders, those are the entities that will be consolidating. You are going shift upwards to larger entities and shift downwards to more and more brokers. That is how the market is going to flesh out in a year or two, meaning there are going to be more brokers.
SICHELMAN: There was a lot of discussion of two issues: the SAFE Act and the Fed’s compensation rule. Which one is at the top of your agenda?
ANDERSON: Probably at the top of the agenda is the Fed rule on compensation, it has such an adverse effect on everybody. It is not just mortgage brokers, it is all originators. What I am hearing from people is NAMB is really the only one fighting for the loan officer. We’re hoping we get push back on that. That is our goal.
SICHELMAN: What do you mean by push back?
ANDERSON: Get (the implementation date) pushed back for 12 months. After all, with CFPB and the Dodd-Frank bill, there is going to be so many changes, I think it is premature to issue any guidance on compensation until the CFPB is up and running.
DELOACH: The loan comp rule from the Fed conflicts with HUD’s rules. If you can have a delay and get all of these rules into one shop over at the CFPB, then that gives you an ability to describe in detail what the problems are in the real marketplace.
SICHELMAN: What about support from other groups?
DELOACH: Large parts of the small lenders and the small middle-market folks have figured out this is a complex rule and there are some answers no one can get a definitive answer to because of the way the Federal Reserve Board operates. When the moment comes, I’m sure they will describe their problem and surface in the fight against the rule.
SICHELMAN: What are your issues with the SAFE Act?
ANDERSON: You have got some states that have implemented credit score requirements. In my state (Louisiana), we have the third worst credit scores in the U.S. If I were doing loans in Vermont, where the average credit score is 710, my guys wouldn’t be approved. I’d lose my license. It needs to be tweaked a bit, it needs to be cleaned up, some reciprocity when it comes to credit reports, call reports.
SICHELMAN: Each state is allowed to look at and pull a credit report but there is no requirement as to what each state can do?
FERGUSON: NMLS does not have any regulation as far as a minimum credit score. So what we’re finding is from state to state, you’ve got overlays as to what that regulator is choosing to use. North Carolina is using a credit score. California is not using a credit score. They’re looking at the credit report to see if there’s any sort of judgments for financial malfeasance. With the economy the way it has been for the past few years, you’ve got people living on credit cards which they may never had a late payment in their life, but if they maxed out every card or they’ve got a couple of credit lines that have been reduced, their credit scores may be in the tank and it has nothing to do with bad business on their part.
D’ALONZO: The SAFE Act was supposed to be uniform, but it ended up as a minimum standard. And every state has created a ton of additional things.
FROMMEYER: We’ve had some situation in Indiana where we have had some marital problem. No fault of the loan officer yet now he has a 410 credit score. He has judgments because she didn’t pay the bills.
