SOME PREDICT THE EVENTUAL DOWNFALL OF THE INDEPENDENT MORTGAGE BROKER!
Not all that long ago, folks were envious of those who made their livings brokering home mortgages. That seems not to be the case these days!
According to the Illinois Department of Financial and Professional Regulation, the ranks of Independent Mortgage Brokers have dwindled 31% since the boom days. Since September, 2005, the number of identified, and recently licensed, IL Mortgage Professionals has fallen from 2,308 to 1,593.
For several of the Independent Loan Consultants our Team works with here in Chicago, potential clients have dried up, as has the number of lenders that will work with them. Some experts predict loans processed through brokers will likely continue to fall both in number and percentage of mortgage loans written as the current financial crisis drags on.
Across the U.S., many large lenders, saddled under the oppressive weight of bad mortgage loans, are bringing their wholesale lending operations in-house as a cost-cutting move. A few, including National City Mortgage and Citigroup, are either discontinuing their entire wholesale loan divisions, or drastically scaling back the number of outside-brokered loans they will accept.
Other mortgage-originating firms are simply closing down. According to trade magazine Mortgage Daily, 240 mortgage lenders have gone out of business since 2006, and another 95 have merged or been acquired by larger companies. The Mortgage Bankers Association estimates total loan originations will fall 20% in 2008.
One Chicago Loan Brokerage Company, Compass Home Finance, is giving up its loan origination license, and merging into business with a local subsidiary of Wintrust Mortgage. Compass Independent Mortgage Broker Alexander Ilich, who has 11 years mortgage experience, will become a Branch Manager with the acquiring firm.
Ilich stable of lenders fell from over 50 in 2007, to fewer than six today. Even these remaining lenders would routinely deny most loan applications. Since he worked strictly on commission - 1.5% of the loan amount - he soon found himself with virtually no income.
"It was a struggle every month. Business started to hurt a year and a half ago. Instead of getting better, it started getting worse," according to Ilich.
A mortgage broker license in Illinois, with application fees, can reach $3,000. With the cost of keeping a license so high, and with business continuing to decline, many loan brokers have begun to question whether the cost of keeping an active license is worth the expense.
Read Mary Ellen Podmolik's article in the October 31st edition of the Chicago Tribune for more info.
DEAN MOSS & DEAN'S TEAM CHICAGO
