Wholesale lending is shrinking, like everything else. But don't count it out just yet.

Many brokers are getting out of the business, but there are still lenders that will use those that remain.

David Olson, a managing partner at Wholesale Access in Columbia, Md., said he suspects wholesale business is down less than retail. "It hasn't lost its marketplace," he said.

Some brokers have dropped out of the competition, he said, and he expects more cuts before the cycle ends - which he believes will be in June.

"Volume is down 40%, so capacity should decline close to that number," Mr. Olson said.

"Everyone is screaming and hurting and trying to wait it out," he said. Brokers are laying off about 30% of their staff. "Come June, we'll have people and resources down to the demand."

Refinancing may pick up again if the flattening yield curve inverts, he said. He expects an inversion in the first half.

Meanwhile, the large wholesale lenders are still doing some business.

"From May through last month, we've been consistent as heck," said Joe P. Harvey, executive vice president at Countrywide. Mr. Harvey said they have done between $6 million and $7 million every month in wholesale loans through their broker network.

"The last couple of years were la-la land," he said, and should not be a benchmark of normal business.

When business was brisk, Countrywide used 9,000 approved brokers. Today, there are 6,000 approved brokers, 25% of which are used at any one time, Mr. Harvey said.

Countrywide's wholesale volume is doing well in the Southeast, Mr. Harvey said - in Florida, Georgia, and Alabama. But business is not up to the level he likes.

"Ask me, am I pleased? No, because I'm greedy," Mr. Harvey said. Countrywide closed some branches and laid off some employees, bringing levels back to normal, he said.

Not all mortgage bankers think a large wholesale business is beneficial.

Howard K. Levine, president and chief executive at Arcs Mortgage Co., Calabasas, Calif., does not think there are benefits to the wholesale business.

"I'm convinced the wholesale business will decline in size even more than retail, because there are no profits in it," Mr. Levine said.

Arcs has four wholesale branch offices and is not planning any changes. "We're not losing money," Mr. Levine said. "We're hoping for better times."

But pricing is getting worse, he said.

"Portfolio lenders are now buying 30-year fixed at two points above screen price," he said. "We are not trying to compete with that."

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