In a few weeks CMG Mortgage in San Ramon, Calif., will bestow a gift on loan brokers in five western states: It will begin accepting their submissions for a new jumbo product with balances as high as $2.5 million.
Because jumbos can no longer be readily securitized, mortgage brokers that rely on wholesale funding have been hard-pressed to find any reliable jumbo funding sources outside of the nation's two megalenders, Wells Fargo & Co. and Bank of America Corp.
"This gives brokers a new product they can sell," said CMG president Chris George.
Don't misunderstand George, though. CMG is not being altruistic toward brokers. It is also offering the product through its retail network.
And as always, the product has a catch. The maximum loan-to-value ratio for CMG's "Home Ownership Accelerator" loan is 65%. Once originated by CMG, the loans will be sold to Ameriprise Financial Inc.'s thrift unit.
For brokers, though, the product is a sign that some lenders are still willing to do business with them despite all the negative publicity they've gotten in connection with the nation's mortgage meltdown — specifically for selling loans to people who could not afford them.
The nation's surviving brokers, including Marc Savitt of West Virginia, a past president of the National Association of Mortgage Brokers, say that third-party salespeople have been wrongly vilified and that those who are still active can do decently but only after a hard slog.
Coastal Banking Co. Inc. in Beaufort, S.C., also will fund jumbos through loan brokers, though it would much rather stick to table funding Fannie Mae, Freddie Mac and Federal Housing Administration loans. "We'll do some jumbos through brokers," said Steve Ralyf, the bank's wholesale chief. "But not a lot."
Coastal, like all remaining participants in the broker channel, is careful about whose loans it will fund. It entered the channel in 2007 — just as other lenders were dismantling their wholesale divisions. "We saw a real opportunity in wholesale," said Ralyf. "Because so many folks were leaving the channel, we had the opportunity to be very selective about who we did business with."
Coastal hopes to fund $1 billion through brokers this year — more than double last year's volume. It has 200 approved brokers but no plan to add much to that total.
Kinecta Federal Credit Union in Manhattan Beach, Calif., recently began funding jumbos through third-party brokers, with a maximum loan amount of $5 million.
So is the wholesale channel on the road to recovery? Not exactly.
Survey figures compiled by National Mortgage News show that in the second quarter some table funders dramatically increased their originations through brokers. Bank of America had a 10,535% increase in broker fundings from a year earlier, but the number is skewed because the banking company did not have much of a broker division until it bought Countrywide Financial Corp. in July 2008.
Clearly, some of the volume gains reflect inroads made because companies leaving the channel forfeited accounts to the survivors. Still, established players in wholesale — including AmTrust Bank, Fifth Third Mortgage, Provident Funding Associates, SunTrust Mortgage and Wells Fargo — also had sizable second-quarter table funding increases, ranging from 39% at AmTrust to 103% at Fifth Third.
New entrants to the wholesale channel have been few and far between.
"I think brokers will continue to struggle to survive," said Scott Stern, the president of the Lenders One cooperative in St. Louis. "A lot of people still blame them for being on the front lines of the mortgage crisis." Some warehouse lenders that fund his cooperative's nonbank members will not give lines on any broker-sourced loans.