Who Is Going To Write These Loans?

The mortgage industry has seen much blood shed in the last 2 years, particularly in the last year. After reading a very interesting magazine article, I began to think about the future...the eminent future and a big question arose, "Who the heck is going to write these loans"? What is the MN Mortgage Mom rambling about now? Well, let me take a step back a few years first.

In the early to mid-2000's, loan officers were a dime a dozen. We were in offices, working out of our garages and in the comforts of our living rooms. We were dressed in suits, dressed in jammies, dressed in nothing (remember, we were working out of our living rooms, for pete sake). The point is, it didn't matter....we were all writing loans and becoming fat cats. Loans were written at light speed. Home values were sky rocketing. In fact, if you had a pulse and could sign your name on a line, you could get a mortgage. Good, bad or evil, that was the environment and our industry was crammed with LO's. Life was EASY.

Fast forward to 2008. WHOA! The big bubble burst. HVCC (Home Valuation Code of Conduct) was introduced. Appraisals became harder. Lenders started to freak out just a tad. Guidelines became just a bit stricter. In MN, for example, stated income loans became a thing of the past. What? No stated income? We really have to collect a paystub or W-2 or tax return? The audacity! Moreover, home values plunged and no one had any equity left. Refinances dried up and it was the year loan officers had to re-align or get out. Many exercised the latter.

Now, I'm not saying that was such a bad thing in hind sight. The mortgage industry could use a fresh cleaning...get rid of the riff-raff, so to speak. The tough got tougher and the weak perished. All-in-all, 2008 proved to be a hard year for all of us.

Present day....WOW. The introduction of the NMLS in 2009. That freaked a whole lot of people out. For those of you who do not know, the NMLS is the National Mortgage Licensing System. It is Big Daddy watching over us. It is one of the ways, as a consumer or realtor to check out your LO. It is our report card of compliance and good work. And we had a deadline...December 31, 2010 or we were barred from writing mortgage loans. Now, being the pig-headed person I am, I was not going to let the NMLS conquer. Commitment or stupidity? Some days, I wonder. Nevertheless, I completed my education requirements, took the national test, took the state test, got finger printed, mug shots and a credit report pulled to boot. Feeling like a convict, needless to say, I passed with flying colors. No, the Twin Cities mortgage market was not going to get rid of me that easy. I'm here to stay.

THAT HAS NOT BEEN THE CASE FOR THOUSANDS.

Let me give you an example. In Arizona, prior to the NMLS, that state had 18,000 loan officers. In the past year, that number has dwindled to 3,200. And it is going to get worse. These numbers are BEFORE the final tally of those who passed their NMLS requirements and are licensed to write mortgages as of January 1, 2011. Every other state is seeing attrition much like this. Our numbers are dwindling really fast.

Moreover, the lending guidelines, restrictions and regulations today are TOUGH. Remember the old saying, it doesn't take a rocket scientist? That does not work for the mortgage industry. In today's environment, you better bet that every thriving loan officer is just that...a rocket scientist. We have to be. Lending guidelines fluctuate at a moment's notice. Regulatory changes are occurring by the minute. Appraisals, title, income, credit and a whole myriad of other factors are scrutinized to the nth degree. It is a literal feat of accomplishment to successfully drive closed mortgage loans and prosper in this environment.

Finally, as of April 1, 2011 the mortgage industry will discover how the government will be dictating our compensation. As part of the Dodd-Frank H.R. 4173 Act, (page 762) loan officer compensation will be governed with oversight from the Feds. Fun stuff. Can you see people clammering to their local mortgage companies aspiring to become a loan officer? Umm...not so much.

Now, let's jump to the future. Six months, a year. The mortgage industry has gone through severe attrition. The bloodbath is over and there are crickets in the halls of former mortgage offices. An excited buyer dials the mortgage call center to get the mortgage process started. A heavily accented person, 2000 miles away replies, "Yes sir, that will be 26 weeks before you can close." Can you imagine?

So, who IS going to write these loans? This brings us full circle and to my final point...Although my illustration above is a bit tongue-in-cheek, there will always be loan officers in every state. BUT, there is going to be a big shortage. Whether you are a consumer or real estate agent, it is in your best interest to align yourself with the best. CHECK OUT YOUR LOAN OFFICER (I will show you how in the next blog). Make sure you are working with a LO who is "in it to win it"...the lifer. Make sure your loan officer is a rocket scientist or has aligned himself/herself with a team who is. Why? Because after the dust has settled, dialing up that call center because you don't know where else to turn is really going to stink.

Happy Buying and Selling!

The MN Mortgage Mom