Mortgage brokering is a work that requires continual awareness of changing housing and lending markets. Investors looking for opportunities to continue improving borrowers’ experiences in this rapidly changing landscape will want to know about recent changes to the industry, what parts of the mortgage lending process could continue to be improved, and what potential innovations are coming down the pike. Real-estate brokers and mortgage lenders have long predicted a day when a homebuyer can have one-stop shopping for a house search, mortgage, warranties and inspections, title and escrow services, moving services, and homeowners’ insurance.
While many lenders have been able to offer an easier mortgage-application experience through digitized front-end platforms, digitization in the industry remains incomplete. Already, many mortgage Web sites provide rates, calculators, loan application forms, and more.
The best mortgage broker has access to more programs than a staff member at a straight-up lender. Because job success as a mortgage broker depends on connections to clients and lenders, most mortgage brokers find their first jobs with established brokerage firms that already have relationships. In exchange for helping homebuyers shop through various banks and financial institutions to find the best mortgage lending options, you may earn a good paycheck at the mortgage broker job. If you are an independent broker, you probably will be working for commissions per mortgage broker.
Competition for business helps to lower prices from mortgage lenders and to save money for borrowers. Getting a mortgage on a house through the Internet can save borrowers money. Getting a mortgage to finance a new home can be an extensive process, for the borrower as well as for the brokerage.
Mortgage borrowers, even those that end up financing through a straight lender, need to be excited about this development. Wholesalers are developing new products for mortgage borrowers without qualifying status, including statements-only loans to self-employed borrowers, as well as investor-driven cash-flow loans. In the face of increased competition, originators are also changing the product mix, offering reverse mortgages, home loan brokers, and home equity loans.
New mortgage originations for Buy-to-Leave investors fell for the first time, according to the Council of Mortgage Lenders. Compared with last year, more lenders reported lower customer demand in the last three months, both for purchases and for refinancing, in this quarter. Looking forward, again across all loan types, fewer lenders expect demand for purchase mortgages to increase in the coming three months than did so last quarter, while a large majority of lenders continue to see declining refinance demand. While rising interest rates will chill refinancing activity, banks, nonbank lenders, and mortgage industry investors are likely to continue seeing high demand in the purchase market.
With banks intentionally shedding market share from targeted housing markets because of tighter capital requirements, punitive fines, and regulatory actions, the investment management company told potential investors that there is still a significant universe of would-be borrowers who cannot get mortgage credit. A spokesperson for PIMCO declined to comment on the performance of its investment in Bravo Fund, or prospects of FGMCs mortgage loans and those not subject to QMs. The investment management company eventually raised $4.18 billion for BRAVO Fund III, selling it to institutional investors as an opportunistic private-equity-style fund, expected to focus on markets affected by regulatory reforms, including mortgages, real estate, and personal loans. The investment management firm acquired the mortgage non-bank First Guaranty Mortgage, as part of a larger strategy of serving lower-end markets.
The investment management company’s proposal to New Mexicos state Investment Board projected a bright future for FGMC, potentially growing the nonprofit lenders’ $325 million monthly loan originations with further investments into the company, then located in Maryland.
Borrowers, lenders, investors, and money managers saw U.S. real estate as a “get-rich-quick” scheme. Since it takes 2 to two to tango, investors kept buying up those subprime mortgages dressed as AAA-rated investments. As an experienced fund manager during the GFC, I withstood enormous pressure from my board to put $300 million in surplus cash I was holding in what became known as subprime mortgages. The returns in Q4 2004 were 11.23% for buying an investment property directly with cash, and 22.43% for investing financed with a mortgage.
At the end of 2004, an estimated 526,200 mortgages were outstanding for purchase-to-let properties, valued at PS52.2 billion, an increase in value of 34% from the year before. In 2006, according to the Association of Independent Mortgage Experts (AIME), mortgage brokers originated 56% of all housing loans. Before the savings and loan crisis, mortgage brokers had 50 percent+ market share, when every broker was independent and had virtually no backing. The impact of the financial crisis of 2008-2009 and the market meltdown has been disproportionately felt by mortgage brokers as opposed to retail banks.
Before Willies mentor, Stan Rhodes moulded the modern-day mortgage broker concept during the 1980s as a result of the savings & loans crisis, most mortgage brokers were limited to providing “hard money” loans only, to unique lending scenarios.