by Tanta on 9/07/2007 07:18:00 AM
Friday, September 07, 2007
I thought I knew the answer to that question, roughly, but twice in the last two days I've seen a number thrown around that surprised me. This morning it was The Morning Call, "Survey: 33 percent of home loans didn't close last month," the first paragraph of which sayeth:
A third of home loans originated by mortgage brokers failed to close in August as investors shied away from riskier borrowers, a new survey says.Oh. So it's not 33% of home loans, it's 33% of brokered home loans. And how many is that?
Mortgage brokers account for about one-third of total mortgage originations, and have originated a larger share of loans to riskier borrowers, so the percentage of failed loans in the entire market may be smaller.Oh. A third of a third failed to close. Or, roughly, 11% of "home loans." Which makes a less impressive headline, for sure.
But what's with that one-third of mortgages being brokered? I seem to recall that back in the glory days, when brokers wanted to take more credit for their part in the "economic miracle," the number was a bit higher. So I just started surfing.
McClatchy, July 5 2007:
Mortgage brokers, who originate up to two-thirds of home loans, have exploited their lack of federal regulation to loosen lending standards in ways that sparked today's high mortgage-default rates among borrowers with weak credit.
Baltimore Sun, August 30 2007:
Some states are looking to require that mortgage brokers act in the best interests of consumers. Roughly two-thirds of mortgages are originated through brokers, and consumer advocates say some steered borrowers to high-cost loans or deliberately excluded real estate taxes and insurance escrow to make mortgage payments look more affordable.
National Association of Mortgage Brokers, May 31 2007:
The National Association of Mortgage Brokers is the voice of the mortgage broker industry with more than 25,000 members in all 50 states and the District of Columbia. NAMB provides education, certification and government affairs representation for the mortgage broker industry, which originates over 50% of all residential loans in the United States.
National Mortgage News, undated:
In 2006 loan brokers using table-funding (the wholesale channel) accounted for 26% of the $3.267 trillion in residential loans originated in the U.S., or $849.4 billion. Brokers and correspondents (correspondents are depositories or mortgage bankers using warehouse lines) together accounted for 62% of all loans produced, or $2.02 trillion. In 2005 retail accounted for 43%, wholesale 27%, and correspondent 30%. These exclusive survey figures are courtesy of the The Mortgage Industry Directory and The Quarterly Data Report.
Mortgage Bankers Association, September 2006:
for the market as a whole in 2004 and 2005, 49-50 percent of loan originations were through a broker channel, 42-45 percent through retail originations, and the remainder through direct marketing channels.
A problem here seems to be difficulty in distinguishing between a "broker" (who has no money, basically) and a "correspondent" (who has enough money to close the loan and disburse funds). The problem is overlap: Correspondents originate brokered loans and then sell them to "wholesale lenders," who also themselves originate brokered loans. It's a big and complex food chain and double-counting as well as non-counting are chronic problems.
Why should we care? Well, besides wanting some reality check on that eye-popping statistic that started all this rumination, I'd like to know if broker market share is truly shrinking in the backlash. I'll keep you posted if I find, um, consistent information.