The National Association of Mortgage Brokers show in Las Vegas this past December was a revelation for what had been an industry and trade group in upheaval.
There is no doubt about it. Mortgage brokers took it on the chin as a result of the financial crisis. The business environment for the trade was unfriendly, with darts coming from government on hand and large mortgage bankers on the other.
Attendance at mortgage broker trade shows on both a national and state level suffered. Yet, NAMB National ended up with nearly 1,500 people registered. To put a context on that, the official attendance at October’s Mortgage Bankers Association annual was 3,500 (although some estimates have the number of unofficial attendees equally that).
The change, as officials from NAMB discussed in a roundtable with Origination News managing editor Brad Finkelstein, was a repositioning of the organization to include all forms of originators. This part of the discussion includes NAMB president Donald J. Frommeyer, vice president John Councilman, treasurer Fred Arnold, immediate past president Jim Pair and government affair committee chairman John H.P. Hudson.
FINKELSTEIN: The attendance at the show this year, with almost 1,500 people registered, when I heard this prior to the show, I’ll admit I was shocked. How do you see this, as both a sign for the business as well as for your organization?
FROMMEYER: I think what you’re seeing is that everything is coming back. We’ve had an excellent year in the mortgage business. I don’t know any mortgage professional right now who isn’t a little bit busy. (As for the conference) we offered a great product this time. We made some changes over the past two years from what we’ve done and this time we became a little more aggressive in doing things. We hired an executive director, Vincent Valvo, to do that and it has really paid off. So a lot had to do with good business and we had a lot to offer.
FINKELSTEIN: Until now it has been a tough ride for the mortgage broker business.
FROMMEYER: It has been and also I wonder if this had been in October or November if that number of 1,500 would have been 3,000 (because) we are two weeks before Christmas Eve.
ARNOLD: The originator, the mortgage professional has finally come back. It was learning how to reorganize, to understand the new legislative environment, to personally financially rebuild our companies. Because of that for several years we had some challenging times getting the numbers here. Because the new professional is looking for ways to serve his or clients even better, serve the consumer even better, that’s why we’re seeing them come in bigger numbers this year than in past years. So not only is it the fact that the economy is a little better in our industry, the level of professionalism is higher than it’s ever been. For this many people to come to Vegas in December shows the commitment our professionals have for the industry. That is what is most important, the consumer is getting a higher quality of professional, that’s seeking out ways to continue to serve the American people even more and that’s something we can’t hold lightly.
HUDSON: I am the government affairs chair and I like to put a GA spin on things. I also believe that while yes over the last several years we have been down, the resurgence this year also has to do with the rebranding of NAMB. We are no longer NAMB, the broker association; we are now NAMB the Association of Mortgage Professionals. The issues that are coming down on both the legislative and regulatory front for originators out there—it is no longer an issue of mortgage brokers, it is no longer an issue of mortgage bankers. These are consumer issues. So mortgage brokers and mortgage bankers are all finally coming together as one united front. And under the direction of the new and improved rebranded NAMB we are really seeing that.
COUNCILMAN: We are going to continue to make those changes at NAMB to make it better. This association is really beginning to gel and work like a machine. We really have made some tremendous strides in this association to bring it back to what it really needs to be to be competitive in this marketplace.
FINKELSTEIN: We will probably never see brokers having a 70% market share of originations ever again. But what do you consider to be, when everything finally right-sizes, to be the proper market share?
FROMMEYER: It is kind of ironic that you asked that, because I was talking with a couple of mortgage bankers and all they kept talking about is how they broker loans out. It isn’t always the fact that the correspondents are (selling as whole loans) 100% of their business. They are doing brokered loans. You have credit unions that are doing that, you have banks that are now doing that. There are banks in Indiana that are brokering loans over to a bank in Illinois, because they can get a better price for them and they don’t have to worry it. I don’t think we will get to the 70% to 75% that we once had. But I would venture to say that 45% to 50% of all loans right now are being brokered.
ARNOLD: I don’t differentiate between brokered loans and banked loans because many of our members are entrepreneurs. Whether they work for a correspondent lender where they are banking some business and brokering or whether they are purely brokering, it is really how much is the individual entrepreneur mortgage originator that is there to serve the consumer, how much market share are they going to have. That is our niche. Our niche is serving the entrepreneur, whether you broker loans or whether you bank loans or whether you’re a hybrid and do both. That’s what is going to define us over the years. It is not about brokering anymore 70%, it is how do we get our entrepreneurs—and the originators that work for us are entrepreneurs in their own right; they don’t get paid unless they serve the consumer—it is helping the entrepreneurs grow their market share.
COUNCILMAN: If we could ever figure out what a broker was, it probably would be a lot easier to define. We hear people in Washington calling everybody a broker, even if they worked for a Bank of America or Chase, who supposedly have nothing to do with the brokerage industry. They look at anybody who originates mortgages as a broker. We need to look at it more from the idea, as Fred says, if you’re originating loans, you are in same scenario for the most part. Now the inclusive NAMB is taking all of those people in. It is a very subtle but a huge change in many ways that is spinning this organization into a much, much larger organization and a much better one.
FINKELSTEIN: In his presentation here, Carrington Mortgage executive vice president Rick Sharga was bullish for mortgages in 2013, barring hitting the fiscal cliff (which was a possibility at the time). Are you bullish as well?
FROMMEYER: The minds up there will come to some type of agreement. But the worst part of those agreements is adding basis points to the g-fees so that we can pay for immigration, so that we can pay for tax cuts. That is not the way to do it either. But 2013 through the first part of 2014 I think you are going to see a lot of mortgages made. There is still a lot of shadow inventory out there that is not on the market that is going to be coming out in 2013 that is going to open up the purchase market much more.
COUNCILMAN: I happen to have recently moved from Maryland into the epicenter of where we found all of the implosion, Lee County, Fla. And one of the reasons it was great for me to move was because I could buy an incredible house for next to nothing. House prices have not gone back to where they were, but I was shocked to see the board of Realtors in that county release figures that show we are selling as many houses right now as they did in 2007. We are certainly on a homebuyer rebound in this county and whether it is refinances or purchases people are going to be doing a lot of mortgages.
ARNOLD: There is a housing cliff and that is the Consumer Financial Protection Bureau. Where do they go with enforcement? Are they going to overregulate and prevent great borrowers from consuming homes? I think that is more of a concern than the fiscal cliff.
HUDSON: An International Monetary Fund report showed that the first-time homebuyer market is at the lowest it’s been in 40 years, at roughly 34%. The National Association of Realtors released their figures saying it is even lower than that at 31%. Couple that with the fact that 83% of all applications today are refinances, people should be concerned. I’m not trying to be a doomsayer, but people should be concerned with the forthcoming regulations coupled with these other potential storms brewing of an aging demographic, where you have seniors who aren’t able to downsize or sell their home; the next generation of buyer is graduating college strapped with student loan debt; and then you’ve got the new qualified mortgage rule, which is going to drastically change how we origination loans, how we underwrite loans, that is something the industry and consumers need to be aware of. I wholeheartedly agree with the concept of the qualified mortgage. We as an industry should make sure the consumer has the ability to repay the loan. However, I think they are going too fast and too tight with what they are going to roll out in the final rule. The trade associations need to all work together to fight and educate our legislators and regulators that what looks great on paper may not always be the best thing for the consumer at the very end.
