We are having a relatively orderly - it could be worse, folks - reorganization of the entire business of mortgage banking.
Pure mortgage banking as traditionally done with warehouse lines alone may be a thing of the past. Mortgage bankers who are not owned by a bank or thrift or some other large funding source may go the way of dinosaurs.
That said there is still a possible life for mortgage brokerage if brokers contain themselves and act responsibly. I am presuming that the market correction will rid us of the fraudsters, inexperienced, predators, etc. and that what we will have left is a population of largely professional mortgage brokers who can and will originate prime paper, okay?
So, that said, I am talking to you, the professional mortgage broker, the prime player who understands that there are larger duties in performance than just self gratification.
First, let's talk about the risk to mortgage brokerage. In a liquidity crunch, we have less money. [I know you know that but I am explaining it for those reading this who may not.] When we have less money, mortgage lenders may be strongly motivated to funnel that money into retail operations rather than wholesale. If we lose wholesale, we lose mortgage brokerage.
This isn't a real horrible problem for consumers because they can easily get their mortgages directly from lenders through retail operations, so consumers won't be too concerned.
From a mortgage brokerage point of view, though, you can help your mortgage lenders by moving into pure prime product sooner rather than later AND you can avoid any consideration of double locking or dual submissions. Yes, I know you think you are protecting yourself and your consumer, but think of the greater whole.
Secondary market managers are going to be traveling through rocky waters and they have to depend on the pipeline data to produce stability. If anyone gets the idea that mortgage brokers en masse are feeding fake locks into the system, mortgage brokers will be cut off. Secondary market managers know that their retail originators cannot double lock and so if the pipeline is purely retail, it is more stable. Remember that.
So, act responsibly. In the grander scheme of mortgage banking, good wholesale relationships provide the volume needed to create a lucrative operation. If the players aspire to good old fashioned standards, agency prime lending, and act responsibly, the professional mortgage brokers will find solid ground in a shorter recovery.