October 25, 2007

Don’t Panic (Unless Perhaps You’re A Mortgage Broker)

Yes, Bank of America is exiting the wholesale mortgage business. No, that doesn’t mean they’re going to stop lending.

The nation's second-largest bank will stop offering home mortgages through brokers at the end of the year to focus on direct-to-consumer lending through its banking centers and loan officers. The move also eliminates the jobs in the bank's consumer real estate unit.

Think tighter lending standards and a renewed focus on underwriting, as well as cost savings and an ability to leverage their existing retail channel.

BofA to Exit Mortgage Wholesale Business [AP]

First Published: October 25, 2007 4:30 PM

Comments from "Plugged In" Readers

Good things do come out of bad situations indeed!

Now all the brokers can become used car salespeople like they've always wanted to do...without feeling ashamed.

A win-win for everyone involved.

Posted by: gh at October 25, 2007 7:05 PM

This is one of my favorite topics as of late so I will comment. Also interested to hear what others think. What we are seeing now is a cleansing of those who poisoned the securitization stream. Securitization is too powerful of a mechanism to just go away and banks will now exert their own quality control (and begin "seasoning" loans to eventually reprime the securitization pump). "Professional" organizations were unable (or unwilling) to police their own and Wall Street is showing them the door. First mortgage brokers, next Realtors (ala RedFin model). The downturn will only accelerate this transformation.

Posted by: EBGuy at October 26, 2007 1:48 PM

How this has anything to do with realtors I do not understand. If anything, this will make people more reliant on realtors. Buyer, "Hey Mr. Buyer's Agent, who has the best home loan rates for me?" This will happen. Have you seen what you get with Zip or Redfin? not a whole lot. Wall Street is gonna show Realtors the door, how? Wall Street?

Posted by: fluj at October 26, 2007 7:06 PM

Fluj, I agree with you that this development has nothing at all to do with realtors. However, your example (assuming it has any basis in reality) indicates that mortgage brokers will always be needed, not full-price realtors. Your hypothetical buyer's Redfin realtor can provide all the market/price information of any other broker and then simply refer the buyer to a mortgage broker for loan information.

Posted by: anon at October 27, 2007 7:45 AM

Most folks need more personal attention, time and and an understanding of recent history than what Redfin or Zip provide. Some people are equipped. Most are not. Anecdotal, and a bit homespun, but true dammit!

Redfin: Good choice. Here is the framework for $3000. Have fun hosting that Open House where you'll be at complete emotional cross purposes from everyone you encounter!

Zip: I'm not much different than any other brokerage except that I'm budget through and through. I'll save you money. But it will show.

Hey, if these scenarios work, then great. Most people need more thorough market analysis and strategy than what these brokerages currently provide.

Posted by: fluj at October 27, 2007 9:08 AM

the only thing i think holding back redfin from success is folks inability to change. it will take generations. i do think that model will work eventually as people stop looking at housing as nothing more than a price per square foot investment. it will not be for everyone however.

Posted by: james at October 29, 2007 12:41 PM

Fluj, I was talking about a buyer's realtor to respond to your point. You retorted re the need for a seller's realtor. Very different issue. I agree that a realtor can be quite valuable when you're selling a place. For the buyer, I don't think realtors add a whole lot of value at all given how easy it is nowadays to garner the same comps and other market info they used to have a monopoly on.

Posted by: anon at October 29, 2007 2:03 PM

Agree with anon -- a realtor provides more value in a selling situation, not a buying transaction. You'll have to do more legwork yourself if you're buying but a real estate attorney and an inspection are all you need to buy (this opinion applies to those who are well-versed in these types of transactions, definitely NOT first timers).

Posted by: Lori at October 29, 2007 2:23 PM

Yeah, well, on the buying side people need help too. A buyer comes into the market. Has he/she been inside of that similar property that sold for X amount six months ago? Unlikely. We are useful because this is what we do. We know micro-market values better than most will be able to glean by cramming. I'm not saying some people aren't equipped to handle it themselves. Some people are. Most aren't.

Posted by: fluj at October 29, 2007 5:04 PM

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