The value of the Mortgage Broker increases because banks no longer can sell loans well
We can kiss WAMU goodbye as it preps itself for an acquisition. Today's news gives all the indications...
We've talked about how bricks and mortar will disappear as local centers of real estate commerce (or at least they should change their sterile function as meeting and signing places). WAMU, along with a $7 billion cash infusion (yes, another fire sale) that dilutes its shareholders about 48%, is closing 186 home loan centers. Frankly, more loan offices should be closed - rental expenses are too costly now that loans are becoming commoditized and the application processes don't require a visit to the loan officer.
And WAMU also closed their wholesale lending division. That means mortgage brokers won't be able to sell WAMU loans to their borrowers. Borrowers must now deal directly with the bank... but what consumer wants to do that now at a time when credit tightening makes it more critical to efficiently source all their loan options.
In one fell swoop, WAMU admits the obvious -
- We're not in the loan sales business any more
- We're re-capitalized, and retrenched...
- Making us a safer acquisition for a bigger bank
What a great post. I've been a regular reader, and felt compelled to comment.
Odds are that chase acquires wamu for the coveted west coast banking network. Key buys nat city...and then collapses sometime in 2010.
Anyway solid and short analysis rocks.
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Thanks Chris, your comments made my morning. I heard last night that a deal for WAMU has already been done... of course yesterday's moves implied this. Note Citi's $12 billion loan selloff in negotiations today... the point to this development is buyers of credit have finally appeared, implying a bottom to the credit crisis. All the banks are reworking their balance sheets to support consolidation. I frankly still don't understand the banks' moves away from wholesale. They seem to be dropping these products in the name of cost-cutting, but they lose the mortgage broker sales force. More later on this.
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Well, the bank's moves are really because the BANKS didn't control the channel. Provident Funding--a really good lender--never made stupid loans. Everywhere else did.
You have any interest in being an author on my Multi Author Blog: NewMarketSurvivalGuide.Com? More of a bootstrapping focus, but if you're into it...I'd love to talk..
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Pat, You're right on the money. What the recent mortgage lending turmoil has done is to reverse the trend that had turned home loans into a commodity.
Today's chaos illuminates the risks and consequences of chasing rate and underestimating the complexity of home financing. This has humbled the consumer and caused a flight to quality that knowledgeable and experienced mortgage brokers will benefit from.
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Pat,
You're right that good mortgage brokers should do well, but they've been squeezed out for the past nine months. Wholesale divisions are closing left and right and those that do remain are giving their best pricing to their own retail divisions. The writing is on the wall for mortgage brokers.
This could change in the future, but unless brokers have the reserves to weather the downturn, they're being forced to leave the business.
Myself, I've gone to work for a direct VA/FHA lender and my former brokerage has consolidated with another reputable firm.
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