The sudden departure of warehouse lender Taylor, Bean & Whitaker from the mortgage scene last week sent shockwaves through the industry, and left behind a Massachusetts lending landscape overshadowed by the big banks.
Since these large, and now in many cases government-backed, institutions are able to dictate rates through their own retail businesses, independent mortgage brokers may find it even more difficult to compete.
Through July, Taylor, Bean & Whitaker ranked 14th overall in the Bay State in total mortgage market share with a loan volume of $536.5 million, according to The Warren Group, publisher of Banker & Tradesman.
However after a raid on their offices, the federal department of Housing and Urban Development found signs of fraud, and cut them off from making any Federal Housing Administration (FHA)-insured loans. The move effectively put them out of business; the company was the third-largest FHA lender in June, according to The Wall Street Journal.
Now just a cursory glance of the market share ranks shows just how thoroughly the national banks, which are players in the secondary market but also retain their own retail presence, dominate the business.
‘We’re Down To Five’
“Right now, you’re really down to five major lenders,” said Brian Comer, president of Advanced Mortgage Services in Norwell. “And in an economy where competition is supposed to be our mainstay, I can’t believe we’re down to five. It’s going to eliminate the true broker – the broker who doesn’t finance his or her own loans.”
Comer, who has his own warehouse product line at Advanced Mortgage Services but got his start as an independent broker, said there were still a few lenders offering brokers competitive products, like Sierra Pacific Mortgage, Merrimack Mortgage and AmTrust Bank. As far as true warehouse lenders, Comer said only U.S. Bank is really still a player since Taylor Bean went under.
“If you talk about Taylor, Bean & Whitaker, they were kind of an equalizer out there,” Comer said. “They kept the banks honest. For the small three-, four-, five-man shops, that was the mainstay for federal loans.”
The losing battle of attrition for warehouse lenders, along with stricter regulation and licensing, is making life difficult for small brokerages.
“There is no way to get smaller in this industry,” he said. “If you get any smaller than [around 30 people], you don’t have the manpower to handle the compliance issues right now.”
Answer Unclear
Denise Leonard, president of the Massachusetts Mortgage Association (MMA), said the brokerage business is in flux right now. There have been too many changes in a short period of time for a clear picture of the future of the mortgage industry.
But Leonard does know one thing: The future will involve mortgage brokers.
“I won’t say that I’m not concerned about the attrition, or what we’re being faced with,” Leonard said. “It’s certainly been more challenging. But I’m not concerned at this point that there won’t be a place for us. We play an important role.”
Leonard said even if the role of non-depository lenders is significantly reduced, the banks will still turn to brokers as an outlet for their products.
“In order to remain competitive themselves, if the group is smaller, they’re going to have to be innovative on how they’re going to move ahead of each other,” Leonard said. “Even those entities will again look at wholesale lending. As a meaningful distribution channel, even for those folks, the need [for brokers] is there.”
