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According to the Wall Street Journal and Bloomberg this afternoon, Wamu is making a lot of changes to deal with their ongoing struggle to survive. With the infusion of $7B from an investment group led by private-equity firm TPG, along with closing 186 home loan centers and laying off 3,000, Washington Mutual has joined the process to eliminate mortgage brokers by closing their wholesale division.
There should be cause for concern among homeowners as mortgage brokers have long provided needed competition, keeping costs and rates down for the majority of homeowners. However, the biggest threat to mortgage brokers isn’t the closing of lenders’ wholesale divisions, but rather the federal government’s intervention.
Today was the last to to post comments on the Federal Reserve Board’s recent proposal. There are some rather consumer unfriendly parts to the proposal that will do more harm than good for the consumer, not just the mortgage broker. Once again, the government is stepping in to ensure the consumer gets screwed as much as possible with little benefit. More on that in another post.
Washington Mutual has joined the likes of Countrywide and Bank of America in closing their wholesale divisions. So far, the effects on mortgage brokers is minimal as they still have access to reputable lenders offering a wide range of loan programs, including the Option ARM.
The homeowner, however, is starting to see less access to ALL loan programs without visiting multiple lenders and/or mortgage brokers, making finding the best loan for the needs much harder to find. Part of that is due to most loan officers at lenders simply originate loans and knowledge is lacking in many areas of the financial spectrum.
Just as many airlines are closing shop and suspending flights, we can expect more lenders and banks to close the door on mortgage brokers. Their ability to minimize competition and maximize profits is becoming essential to their survival. Unfortunately, the consumer will likely see higher costs associated with loans in the long run.
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