Mortgage brokers accounted for six out of every 10 home loans issued at the height of the refi boom, their trade group says.
A newly released survey by the National Association of Mortgage Brokers shows how that industry became, in essence, a refinancing factory in 1993, churning out its greatest percentage of conventional loans in perhaps a dozen years. Normally, its market share is between 40% and 50%.
With mortgage volume now in a slump, though, the brokers have been hit hardest, with many of them slashing staffs sharply or simply closing up shop.
Thus, the survey demonstrates what most lenders had long suspected: that mortgage brokers take advantage of changes in the lending market better than any group of home-loan originators.
The survey also highlighted the growing importance of quality control and customer service, and anxiety over increased regulations.
As with others lenders, 1993 was a monumental year for mortgage brokers. Loan production soared as a result of low interest rates. And with their close proximity to borrowers, mortgage brokers cashed in on the craze to refinance.
The average mortgage brokerage outfit saw its business grow 30% in 1993, according to the survey.
Brokers increased their originations of every loan type in 1993. Conforming-loan originations jumped the most. The 184 brokers in the survey group originated 42.3% more conforming loans in 1993 than the year before. They also originated 18.6% more Federal Housing Administration loans and 20.8% more jumbo mortgages.
Most mortgage brokers sell their loans to wholesale lenders, who in turn sell the loans to investors while retaining servicing rights. The lenders doing the most business with mortgage brokers were Metmor Financial Inc., Overland Park, Kan.; GE Capital Mortgage Corp, Raleigh, N.C.; and Countrywide Credit Industries, Pasadena, Calif., the survey showed.
Regarding compensation, mortgage brokers took a fairly proactive stance. Some 42% of those responding to the survey said they employ their loan officers as independent contractors. "This is an important issue, considering the financial implications - paying income taxes, workers' compensation, and medical and disability insurance," according to the survey.
Regulatory issues also made an impact on mortgage brokers in 1993. Fair- lending issues led 19% of the survey's respondents to increase their participation in such programs. And 52% said their disclosure requirements increased in 1993.
Brokers treated quality control in a variety of ways, the survey showed. Corrective actions were taken by 54% of respondents, while 33% did nothing to control loan quality.
Most brokers - 46% - did their own quality control. Meanwhile, 39% used independent quality control contractors. But most lenders do not maintain written records of the quality control reviews except when corrective action is taken.