The National Association of Mortgage Brokers has met for the last time. At least as far as annual meetings go.
The group now goes to a regional meeting format. I took advantage of NAMB's last annual meeting, in Indianapolis,to participate in a roundtable with the group's officers. Excerpts are below.
Besides me, participants were: Marc Savitt, NAMB president; Jim Pair, NAMB president-elect; William Howe, NAMBvice president; Don Frommeyer, NAMB secretary; Michael D'Alonzo, NAMB treasurer; George Hanzimanolis, NAMB immediatepast president; Roy DeLoach, NAMB executive vice president; and Brad Finkelstein, Broker editor.
MARK F.: Obviously the last 12 months have made for the most challenging year in the history of the mortgage business.I'm wondering if you could comment on that and some of the lessons learned for the industry going forward?
MARC S.: As you know, we've had some problems over the past 12 to 18 months with image, and I feel as though thisis something that was unjust. We've said this for a long time, and as George mentioned in his opening remarks [atthe convention], there was a GAO study that came out that vindicated the mortgage brokers. We don't want to getinto pointing fingers; we don't want to look back. We want to look forward, and the thing we need to do is to makesure that the mortgage brokers that are members of NAMB, their honesty and integrity are above reproach.
This is associated with the Lending Integrity Seal of Approval; all brokers, regardless of how they're regulatedin their states, would be required to have a
| As George mentioned in his opening remarks, there was a GAO study that came out that vindicated the mortgage |
background investigation and continuing education. We want the consumer to know that when they work with a NAMBbroker they are dealing with somebody who has been vetted through the process and they are dealing with somebodythat is responsible. That is going to be our first approach.MARK F.: How do you get that message out?
MARC S.: I think brokers can do it on an individual basis in their communities. Talk to the media in our own localareas and educate them to the benefits of dealing with a NAMB broker and the benefits the consumer has becauseof the Lending Integrity Seal of Approval.
MARK F.: National Mortgage News recently published data that shows subprime volume for the firstquarter was $4 billion -- that is down 95%. That is a business that has just about gone away. What new productsare brokers taking to, to replace subprime?
MARC S.: I think FHA is the first place you would try and place those borrowers now.
JIM: We've lost a lot of brokers, and a lot of those that got out of the business were dealing in subprime andwere just in the market just to make a quick buck. When that product went away, they went away, which is good forindustry and good for the consumer that that happened.
BILL: Fannie Mae and Freddie Mac did raise the loan amounts in high-cost areas, FHA tried that, and it did nothelp in all states. The state I am from [Arizona], we only gained about $15,000 with the new FHA limit. However,they are also looking at raising the HECM limit, and I think that will help seniors quite a bit.
MARC S.: There are the USDA loans. USDA will take a borrower who might not have high credit scores -- not necessarilyderogatory credit, but the scores maybe lower because they haven't had that much credit. This a program that provides100% financing, it gives the consumer that lacks the downpayment and closing costs [the chance] to get into a propertyfor up to 102% of the sales price. So that is another product that has replaced a lot of the subprime loans.
MARK F.: Did the administration attempt to zero out the USDA program in the upcoming budget?
MARC S.: Not the guaranty program. The direct program they have. The guaranty program is different. That acts moreas insurance. They don't actually loan their
| I think you don't see as much of the risk layering that you saw before. |
money, they are insuring a lender, much like FHA or VA.BRAD: Do you see subprime coming back? Will someone start buying these loans again?
MARC S.: I don't know about the rest of you, but I've seen advertisements that have come across our fax or thathave been e-mailed to us with products that are similar to subprime -- maybe not to the extent they were last time[in terms of guidelines] but that are also not to the extent that conforming loans are.
GEORGE: I guess it depends a lot on your definition of subprime, too. I think you don't see as much of the risklayering that you saw before. In other words, the high loan-to-value, [combined] with the no income verification,[and] with the low credit score -- I think those were the dangers that affected the market. We've always said themarket was probably too far in the wrong direction to start with. When those products were developed on Wall Street,maybe those weren't the best things. They counted on appreciation. As the market starts to stabilize a little more,I think you are going see lenders come in with make-sense loans that aren't necessarily conventional, conforming-typeloans. If you consider those subprime, those are the product I think you will see coming out. I don't know if we'reever going to see what was out there before, and I think we probably don't want to see what was out there before.
DON: Some of those subprime lenders are coming back as FHA lenders, and I think they are starting to take the analysisand say "these were the loans we should have been making." I think they are making a concerted effortto get back in the market in some way, shape, or form.
BRAD: I know NAMB has opposed a fiduciary duty requirement, but does the broker bear some responsibility to theconsumer even if a product's guidelines do not require income or asset verification?
ROY: Even though we're not the people that actually underwrite the loan -- we don't make the decision to closethe loan, we don't wire the money to the table -- perhaps, looking back, we could have at least asked a few morequestions or taken those issues to the policymakers. But the bottom line is, we're small businesspeople in ourcommunities, working hard day in and day out, trying to meet our customers' needs. And we do generally rely uponthe people that are making the product and selling it to Wall Street to do the analysis of "Do these loansmakes sense?" Our part, in hindsight, we could have raised some red flags. But bottom line, we rely upon otherparts of the market to make those decisions.
