O.C.’s mortgage sector won’t come back, readers say

April 8th, 2008, 3:00 pm · 22 Comments · posted by Andrew Galvin

Andrew Galvin writes:

The results are in: Orange County’s mortgage industry will “remain a mere shadow of its former self.” That’s according to 82 percent of 378 people who voted in our most recent poll, which asked “Can O.C.’s mortgage industry come back?”

Just 18 percent of voters said “the million-dollar salespeople will be back,” a reference to the seven-figure-earning loan officers and account executives of yore. Some of them worked for Jon Daurio.

I wrote a story for Sunday’s Register that looked into the future of Orange County’s mortgage industry, especially subprime. Don’t know if you got to see them, but some of the comments posted by readers on that story were interesting.

Here’s an example from reader ocbear:

When all these mortgage companies popped up I felt that Orange County went to the shady side. I’m so glad they’re gone. It’s like cleaning up graffiti or kicking the mafia out of your city. Whenever I’d drive on the freeway and see these companies I thought, of all places, why does it have to be in Orange County? It would be more fitting that these scammers would originate somewhere like Florida instead. It would be nicer if our area can focus on legit business like biotech for future growth.

Now, on to our next poll question.

With WaMu becoming the latest company to get out of wholesale lending,

Are mortgage brokers headed for extinction?

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NationalBubble.com says:

April 8, 2008 at 3:13 pm

Unlike Arnold, the mortgage brokers “won’t be back” and I’m glad of it.
Who needs them?

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franko says:

April 8, 2008 at 3:26 pm

Brokers allowing for a free exchange of competitive pricing is a good thing, except the brokers also try to make the most out of the transaction plus pass on all the responsibility of the transaction. I have always thought it to be a rampant problem that brokers have multiple licenses to work through with varied amounts of accountability, yet able to walk away from transactions unscathed… even when the transaction should have never been set up, sold or processed. The blame to the problems are NOT solely on brokers hands, but definately a huge part of the problem, while lenders completed deals too.
If business is still competitive without brokers, and customers still have choices- then so be it.
I feel bad for the 5-10% of brokers that have actually done business the honest and fair way… although I do not trust any of them.

VoiceofReason says:

April 8, 2008 at 4:00 pm

When your handle is “ocbear”, we pretty much know what you’re going to say. Orange County has been, and will always be, a center for real estate finance. It’s not rocket science. Property is valuable here and there are lots of people with money here. Pretty potent mix. So, although I have met many a greedy loan agent, there is just too much money to be made here to think for a second that the financing sector will leave just because you don’t like them. That’s a joke.

Liar Loan says:

April 8, 2008 at 5:16 pm

A quote from Andrew’s article:

“Some 14,000 fewer people work in lending in Orange County than did in February 2007, a drop of 27 percent.”

Am I reading this wrong or does that mean the other 73% of lending jobs are still intact in OC?? If so, that means there are still 36,500 lending jobs in the county… Not exactly a dead industry even if the million dollar sales people are now collecting welfare.

SeekingAlfalfa says:

April 8, 2008 at 5:32 pm

National Bubbie,
Who needs You? With your big mouth you must have a carbon foot print the size of LAX

BobE says:

April 8, 2008 at 5:38 pm

The problem with commission based employment is that even if you do one mortgage a month you’re still “employed”.

I read an interesting story where the brokers who were laid off were actually happy because their “employed” former colleagues were working their butts off for no pay.

Melanie says:

April 8, 2008 at 9:36 pm

The vast majority of mortgage brokers not only did not provide a useful service, they did not provide service commensurate with the fees that they collected in connection with each transaction. Most of them were solely concerned with collecting the commission/fees and would extend loans to people that could not afford it (and imply to the borrower that they could, or that they didn’t need to worry about it and could simply refi when their loan started adjusting). I have personally observed blatant fraud and forgeries in funded loan files, it was expected that when you worked in the industry that you would be willing to either look the other way when you saw “irregularities” or even help to provide a rationale for it. I remember on MANY occasions hearing a broker suggest that if the borrower couldn’t qualify that they could “manipulate the file”. Guess what that means?

GOOD riddance to this industry. i have a feeling that the stats are skewed a bit because ALL of the thousands of people that I worked with at all three mortgage companies that I worked for are no longer employed in the industry and many have moved to other states.

The market for housing will never be the same. The demand is but a small fraction of what it was, and unless there is a mass migration of doctors, laywers and indian chiefs to OC, its certainly not going to increase.

I know of at least one person that walked away from everything. She was in the mortgage industry her whole life (and is now in her 40s) and knew nothing else.

OC Bro says:

April 8, 2008 at 10:16 pm

Funny that ocbear says getting rid of mortgage companies is like getting the mafia out of your city. The biggest complaint I hear in Vegas is that the mafia has left!! Unlike the mafia, as long as real estate owners need to finance the purchase of their properties, mortgage companies will always be around.

subblime_subprime says:

April 8, 2008 at 10:37 pm

subprime will be back, i would like to remind everyone of the S&L crisis and the loose lendings standards that led to their demise, at least partially. We all said it would never be the same…and then we had the Long Beach’s, Quality’s of the world start up…then we only lent 75% and that will keep everyone safe, then 80, then 85, then 90, then 95, then 100% LTV programs for what amounted to dirt bags with 580 or even lower credit scores. We will do that process again, last time it went from 1990-91 to what 2007….. and NOW we have hard money (again) and they will only lend 50-75% max depending on the lender….and so on and so on…Brokers provided a service if they were a good broker. I mean do you all really think the brokers are responsible? Not the Lenders or Wholesalers, or Wall Street, or the Investors who bought the product or even the speculators, or Realtors….We were all the problem. Because of society is based at times on Keeping up with the Jones’ and Hating of those that have more than you…You all know its true.

GG said it best, “Greed, for lack of a better word, is good.” Or at least in the OC it is…

Larry P. says:

April 9, 2008 at 12:19 am

LOL!!! Oh, I never am amazed at the overwhelming ignorance out there in the general public about the difference between banks and brokers (the GOOD ones) I was thinking about this as I priced a loan Saturday against one of what most of you would call “the good guys” a very large local Credit Union….nothing big, a conforming 30-year fixed, Full doc, 722 FICO at 70% LTV on a no cash out refi….my client was quoted 6.0% with total fees of about $1,700 including 3rd party fees. APR was like 6.12%…I quoted 5.875% with ZERO fees! That runs my streak to like 2 years of being able to beat any bank or credit union when push came to shove on both rates AND fees…and if rates drop again, even right before closing, i can just switch lenders…banks and credit unions cannot! No flexibility!

The thing is folks, every bank, credit union, whomever builds in a PROFIT on whatever loan they get you…only brokers have to show you what it is, while the lenders themselves do not! Most lending institutions build in 1.25-1.5% AFTER fees! the reason they have few fees is usually because they are getting more “on the back”…the spread between the REAL zero points or PAR rate and the rate they are getting you. 6% as of Friday would have been a spread of about 1.5%. Since most brokers have less overhead (like myself), they don’t have to go for the whole thing and STILL make a decent income. Or did you think the “good guy” banks and lenders made their money on the interest you are going to pay over a 30 year term? Ha! Good one! Financial ignorance is what makes anyone believe that!

That credit union, whom I have heard others praise on this board before, is a business like anything else. they want to make some M.O.N.E.Y.! I love beating the banks…the only brokers that have gone away are the fly-by-night kind…the pros who have always given the public the programs and services they want and NEED are still around….despite what those hateful and ignorant among you might think…and one more thing, the banks NEED us too…they, just like anyone else cut back services when times get tough like WAMU and BofA….what’s the point of keeping open a division that has lost customers (the brokers) by the thousands and has lost sales volume by 50%? Do you REALLY think such moves would be made in a vibrant economy? Any kind of significant mortgage activity picks up and you’ll quickly see the announcements of “WAMU announces the re-creation of Wholesale Lending Division” and so on since they would have to open other branches to capture busines otherwise and that costs MILLION$$! They may have been dumb with some of their programs but they aren’t stupid! Only the bitter and ignorant public is! People seem to forget it was the WAMU’s and Countrywide’s and World Savings’ and Wells Fargo’s that offered these subprime and Option ARM loans (World Savings’ “pick-a-pay” loan even let you defer 25%…but they’re your buddies, right?) right in their own branches that you blame the brokers for now! But that’s right…they’re the “Good Guys” right? They didn’t MEAN to do it! LOL!

April 9, 2008 at 1:00 am

BobE, the problem with ANY industry that pays commission only is if you sell only one of whatever product you are still employed…that isn’t limited to the mortgage business! Believe me, when I left the cushy world of Salaries + Bonuses and stock options, I wondered and worried aloud at why the business operated as “Commission only”…now, working from my small office and usually from home, I no longer worry about it…commission only means you are essentially “self employed” and like any self-employed person what you do to create and maintain your business is what defines your career longevity. Commission only doesn’t create people with bad character…bad character comes from within and not from a business model!

Melanie, sounds like you worked for some real slugs! Why’d you work for three of them? Did the money keep your morals at bay or something? Once the paychecks got smaller the bosses became a lot more sleazy did they? I would guess that like anything, you probably dealt with people who actually did things the RIGHT way though maybe you didn’t notice them as much as the slugs! Or did you think that an industry of 50,000+ people in the business here in OC were ALL just closet pimps and drug dealers in waiting? Just like not everyone in the projects is a crack addict or gang member not everyone in the mortgage world was/is a sleazebag! Quit making stereotypes like the rest of the ignorant masses…you really SHOULD know better! Unless of course, you went from New Century to Ameriquest to Home Loan Center….then I wouldn’t be questioning your views…I would be questioning YOUR ethics and morals! That would have been the “Triple Crown” of sleaze!

Dina says:

April 9, 2008 at 7:09 am

I don’t know that ridiculing your clients, the public, is going to get you more business. It reflects poorly on your industry and reinforces the current negative image.

April 9, 2008 at 8:19 am

Dina,

That’s all you got from my post? Pretty narrow comprehension you have there…not that it surprises me! Dina, spare me your sanctimonious tone….you have never posted anything but contempt for ALL brokers on this board and I would consider you one of those to whom I refer! Unlike some others, I don’t post here to attract business, I post here to give my facts and opinions as someone on the inside…most that “have negative views” about mortgage brokers are like you and post little “soundbites” lacking substance and backed with nothing but opinion gleaned likely from only sordid stories of subslime brokers and lenders. The Register has never once profiled an A Paper broker (despite them being the majority in OC) since I’ve been a reader and since Subprime makes for good news fodder, that is all the ignorants know about and base ALL of their opinions on! So I don’t need THAT public and I am not going to take slings and arrows from the same public that for 4 years begged for “Cash out”, “No money down”, “Stated income Stated Asset”, and “1% Option ARM’s” or what I called “Lifestyle Loans” as they were used so that they could fuel a lifestyle most of you now solely blame ALL mortgage brokers for! Were there sleazy mortgage people? Hell yes there were….but I saw HUNDREDS of “Me First….damn financial logic, I’m gotting to hit the lottery with this house…got to keep my credit cards open for business” attitudes in many borrowers that came across my desk so greed and sleaze wern’t operating in isolation in those skeezy mortgage people…and I won’t hear it now from them that the mess going on is mine or any other responsible mortgage person’s fault like blog-pimp “National Bubble” above does…or you! I’m not here to Pump up business and I definitely won’t “turn the other cheek!

Truthi says:

April 9, 2008 at 8:42 am

comrade larry pinsky,
there will always be people who stereotype an entire group of people because of a few bad apples.
don’t let them to bother you.
they mistake me for truthiness and i get some personal attack here too. i just ignore them.

broker_X says:

April 9, 2008 at 9:11 am

As a 15+ year mtg broker, it’s the first time I’m really concerned about the future of my profession. Yes, I consider it a profession, though with the quick-buck scam artists that came into the biz, it oftentimes didn’t look like much. But many of them are going back to bartending and selling cars. - The BIG problem I see, is that for lenders to compete in wholesale, they needed to be competitive, or have a niche. Afterall, good mortgage brokers are always shopping for the best rates and programs…they are informed providers, if you will. - But a person walking into their local bank branch won’t have the opportunity to compare rates & fees the way good mtg brokers would do. - I really blame the mess on the lack of regulatory oversight. If there are no penalties, then the big profiteers bring in the young pups and teach them that ripping people off and makin gup income & asset numbers are the norm…’everyone does it.’

So while it’s great, mindless fun to scapegoat mortgage brokers, that’s only where a portion of the blame rightfully goes.

Harry Poon says:

April 9, 2008 at 11:19 am

Why would anyone use a Mortgage Broker when they can compare rates themselves by using the Internet. I think if you are lazy, then you might use one. But if you are willing to do the leg-work and research yourself, a Broker is useless to you.

April 9, 2008 at 11:40 am

Harry Poon,

The internet lies….comparing rates on the internet is useless because nobody has the REAL rates with the REAL fees…my clients all appreciate me….would you do your own heart surgery? You could probably read how to do it on the Internet after all!

Chris C. says:

April 10, 2008 at 1:43 am

I specialize in financing for income producing properties…my firm is approx 15 yrs old & we take our fiduciary responsibilities very seriously (we pay for an independent auditor to make sure constantly comply with CA Dept of Real Estate regulations). By not taking advantage of our clients, we enjoy repeat & referral business. I know we are not the only mortgage brokerage firm running a clean shop. We add value by striving to know the lending market better than anyone - we represent dozens of lenders and we are in the trenches all day long! The borrower who contacts just a few lenders on his own is quite possibly doing himself a disservice - how would he/she know which lenders have a loaded pipeline and are raising their rates, or which lenders are running out of money? A competent, honest, and connected loan broker working full time has a much better chance of success in finding the best rates / programs and, equally important, knowing which lender will DELIVER the best rates / programs, in a timely manner (what good is a low rate if the loan cannot fund?). Having a substantial volume (nearly $1 billion annually), we are privy to many things that an independent borrower would have no clue about. We get rate sheets on a regular/daily basis from the best wholesale lenders in the market . If we were not adding value in an ethical way, lending institutions would not touch our loans. Lenders come and go. We are not going anywhere (many of our lenders would have to replace our volume with several employees and they cannot afford to do that). The ongoing credit crisis is causing all real estate lenders to change their underwriting standards - we are advised of lending criteria changes EVERY DAY. If you consider working with a broker, ask for references. Read your good faith estimate - if you don’t understand it, ask questions! If the broker cannot answer questions to your satisfaction, speak with the lender! If you don’t like the answers you are given, don’t proceed! DO NOT GET A NEGATIVE AMORTIZATION LOAN UNLESS YOU CAN AFFORD TO LET YOUR PRINCIPAL BALANCE GROW! The broker who does what is best for his client will enjoy repeat business and referrals, the broker who does what is best for himself will forever be scrambling to replace a victim.

April 10, 2008 at 10:51 pm

Well Said Chris! Now, most “civilians” here would just as soon hang you from the nearest Oak Tree because they have been spoon-fed the myth that every Broker does sleazy subprime loans and drives around their ill-gotten spoils in a shiny new Maseratti, but at least you took the time to type that post!

Carlos says:

April 10, 2008 at 11:24 pm

Mortgage Brokers, Real Estate Agents, and Appraisers took advantages of the system for too long. This is a monopoly and ripoff market.
You are paying everything and taking all the risks. When market turns around, there must be a way to avoid these 6 percents fee and others.
It is simply outrageous.

jeff says:

April 23, 2008 at 8:06 am

Brokers are nothing more than a used car sales manager. Bottom line, it’s Wall Street that dictates the crappy cars that these guys sell. I notice a lot of brokers are going into “financial planning” and selling insurance now. Thank god for the do not call law.

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