As the National Association of Mortgage Brokers held its annual NAMB/West conference in Las Vegas, both the industry and the trade group were dealing with some questions about their respective futures.
It is no secret that mortgage broker market share slipped drastically in the months and years since the start of the mortgage bust. The bust was also one of the protagonists for the thinning of the number of people in the business. NAMB's membership is currently at 5,100 and this does not include many who came into the industry during the boom years who never even joined the organization.
Another item that hurt the industry has been the loan officer compensation rule.
But there are signs of a turnaround. Recent data show 1,500 employees added to mortgage company job roles, almost all of that from brokers, according to the U.S. Bureau of Labor Statistics.
NAMB sees an opportunity to grow membership, which was discussed in another part of our roundtable discussion. There are over 113,000 loan originators registered on NMLS. The organization is working with Think Big, Work Small in an effort to target those LOs who do not belong to NAMB.
For the second year, NAMB saw a change in its top leadership just prior to the conference when Michael D'alonzo resigned as president. Don Frommeyer replaced him.
And NAMB put to rest one of its biggest overhangs when its delegate council approved changes and no longer requires a broker to be a member of both the state and national groups.
The niche for brokers still exists; as one roundtable participant put it, "We're 24/7."
In this part of the discussion, Lew Sichelman, senior housing correspondent for National Mortgage News, asks members of NAMB's executive board what they are dealing with on the legislative front.
He is speaking with Frommeyer, Mike Anderson, NAMB vice president, Jim Pair, who holds the immediate past president's slot on the board, and John Councilman, treasurer.
SICHELMAN: What are your legislative goals for the coming year? What is most important to NAMB right now?
ANDERSON: Our No. 1 goal is to try and amend the loan officer compensation rule. We picked a battle that we think we can win. We have been working with Rep. Gary Miller, R-Calif., who has a bill, H.R. 2509. Our lobbyist Roy DeLoach has been working on this for the past several months. We are getting very close. We are going to have a hearing, possibly the week of Dec. 19 or some time in early January. The bill is to change LO comp where if we have multiple loan officers we are going to be able to pay our loan officers a share of the commission. Right now under LO comp, if you have multiple loan officers you can't share the commission because they classify a mortgage brokerage firm as the same definition as the originator. If we pay our originators (commission), that is a violation of dual compensation. So the consumer can pay us and we can share it with the loan originator. That would be a big win for the broker. There is also a piece in (Miller's bill) where at the closing, we would be allowed to pay some small incidentals for the borrower at the closing table and lower our compensation because we're not allowed to lower our compensation now.
SICHELMAN: What else is on the agenda?
ANDERSON: We also are working with the CFPB. We met with them on a couple of occasions. We are working on transitional licensing so if we have crossover, if somebody from a bank wants to come work for a mortgage broker or a mortgage banker, so they can go ahead and start working for the mortgage broker or the mortgage banker.
SICHELMAN: Is that the same thing as portable licensing?
ANDERSON: It is kind of the same thing. But is transitional because you have to have the 20 hours of education, if you are in good standing it has to be certified. A lot of them have a registration with the NMLS already so if they want to cross over, at least they don't have that waiting period. It has been a disadvantage for the mortgage broker and the mortgage banker (versus) the depositories which are exempt from the same requirements.
SICHELMAN: You have an ally in the Mortgage Bankers Association on this one, right?
ANDERSON: Yes we do.
SICHELMAN: What's the outlook on this?
ANDERSON: I'd say it is positive. I wouldn't say that it is a done deal; we've got a ways to go. We haven't been shut out at the door.
SICHELMAN: What is the future for mortgage brokers?
FROMMEYER: The mortgage broker right now is actually on the climb. We are seeing more and more wholesalers that are popping up. More people are actually becoming a mortgage broker. We've seen an increase in some of the states of people that have left the banks or left their net branches and are becoming a mortgage broker. There are just a lot of opportunities as a mortgage broker. As a mortgage broker you have more venues to take loans through. It is just more opportunities to make loans. I think you are going to see a continued increase in mortgage broker people. We hit rock bottom. I'm not kidding you, we hit rock bottom and we lost a huge, huge number of number of people. But you are seeing a lot of people that are LOs in banks knocking on the doors of mortgage brokers to see what they can do about possibly coming over. I think the future is bright. I think the mortgage brokers are starting to grow again. At one time we had 65% of loan production done by mortgage brokers. Now we are down in the teens. I really think there are great opportunities on the horizon. We have a few little obstacles that we need to take care of—one might be transitional licensing.
ANDERSON: What does it tell you when you've got GMAC entering wholesale? And I just found out at this conference Quicken Loans has entered the wholesale business. So they're going after the mortgage brokers as well. So I think the future is very bright.
PAIR: Mortgage brokers have always consumers in the past. And we've have found in this transition over the last few years that as we've lost mortgage brokers, the consumer has not been served as well as they had been before. It is really important that the mortgage brokers come back into the business to help the consumers. The other thing is, eventually the economy is going to start improving. And there is no way in the world that the banks and mortgage bankers, as the economy grows and as demand grows, can fulfill the need.
SICHELMAN: When you talk about choice, you say without the mortgage broker's help the consumer's choices are limited or they are not being told of all their choices. How do you see that playing out?
PAIR: By choice I mean they are not getting the full information that they need about the different variety of products that are available to them. A lot of the traditional lenders are not working with some of the consumers that are hard to work with and mortgage brokers have always been there to help those types of consumers. So a lot of consumers are being shut out of the market because of that.
ANDERSON: Plus the mortgage broker serves the urban and rural areas of the country where the big banks do not. You look at the typical mortgage broker, a lot of them are small mom-and-pop shops that go to church and school events. That is where mortgage broker really thrives—in serving those outlying areas and giving that personal attention. Not everybody wants to get on the Internet or talk to somebody on the phone in a foreign country. They want to meet with that person face-to-face. And the mortgage broker still has the capability to give that service to the people in those outlying areas.
COUNCILMAN: The broker allows other sources of lending, such as Wall Street and other firms, to get up and running. It is virtually impossible for a Wall Street firm or other source of capital to come into the business without some sort of premade origination channel. They're going to look for a ready-made market of originators; brokers provide that. And if we ever intend to get away from simply having Fannie Mae and the federal government providing all of the products, we're going to have to put private capital back in.
