Paul Muolo of National Mortgage News put it very succintly in his most
recent column:
Paul also wrote that Angelo Mozillo is predicting that by 2009, there
will only be five major lenders left.
Here is what is happening. For five years, the mortgage industry
expanded. Credit was easy. Real Estate values, based on the
availability of easy money, rose. The correction is occuring in a much shorter period of time than it expanded. There are fewer loans to be done, and more originators fighting for those fewer loans. There are also fewer investors willing to buy loans, thus, even if you can 'do a loan', it doesn't mean it gets done.
Lenders (and its driven by investors) are cutting off third party originators first. For some mortgage bankers, they were always a retail originator and added a wholesale channel to take advantage of their licenses and credit lines, so wholesale wasn't a priority. But when you have Novastar cutting back on funding loans through mortgage brokers, its impossible not to think that mortgage brokers, by failing to police themselves, might become an endangered species.
Fewer lenders, fewer loans, few brokers. Less choice for consumers, less competition means higher prices.
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