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More On the Future of the Lending Industry
24 Feb 2009 | 5 Comments | posted by Corey Curwick Dutton | in News
After listening to President Obama’s address tonight to Congress and it spurred me to try and solicit more commentary from some of you in my network on a topic I brought up in one of my most recent posts on the future of banking and lending. Obama talked about the need to create more lending when he said, “the cost of inaction is far greater.”
I usually don’t like sites, blogs, or forums that generate negativity. But I found something recently on a site called, ‘Mortgage Lender Implode Meter’ that I wanted to blog on. (Even though I won’t link the site or the posting here, ha ha.).
The site features a list of ‘imploded’ lenders. To reference one of my recent posts on the future of lending and banking, this list really hit home. Currently there are 335 companies that have gone out of business since late 2006.
I’m sure it hits home with a lot of people in this industry who are out of jobs. I wonder what these people and others feel is the future of the lending industry and how it could evolve? What changes are occurring right now that will set future standards?
I wanted to try and solicit more commentary on this topic from all of you so, please, feel free to share.
Posted by Corey Curwick on February 24, 2009
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5 Comments
I have been a commerical mortgage loan lender for 20 years with General American Life, Conning Asset Management, MetLife, Swiss RE, KeyBank and Morgan Stanley (CMBS) and have never seen a log-jam like this. I’m out of a job for the first time as a lender. My opinon is that we are still 18 to 24 months out before any sort of nomal lending returns and when it does return it will be at levels that will make refinancing current loans very difficult as most borrowers will need to come “out of pocket” significantly. Wall Street CMBS as we knew will never return.
Can you give us the link to the web site you mentioned?
Implodeometer has been around for awhile and is the central source for watching the residential mortgage industry…implode. it has a similar site that tracks tghe demise of hedge funds.
Private money lending has been generally less impacted, as loan underwriting is more methodical, lenders and borrowers both have skin in the game, and loans are not originated for sale. As a private lender, when you make a bad loan, you live with it.
On the residential side, business will be more like it was twenty years ago: banks will play the major role, brokers will provide auxiliary services…if any. Private money will take a less active role as well as costs and liabilities make it an unattractive business (California is a great example of this, with private lenders suffering for the sins of the subprime meltdown that it wasn’t involved in).
Commercial will be more attractive, especially as banks pressure borrowers for repayment of short term loans that can’t find take out financing. Private money will be able to step in as a bridge.
Post-Madoff/Stanford et al, investor scrutiny will increase dramatically; regulatory oversight will also stiffen at both the state and federal levels. Brokers, for example, will be subject to Federal education and licensing standards, similar to those imposed on stock brokers.
The Federal government will play a much, much bigger role, and this will create opportunities due to inherent government inefficiencies and lack of familiarity with the underlying businesses. There will be more hoops to jump through, but for those willing to jump, there will be opportunity.
People who choose to remain in the industry will have to know their business. They’ll have to be professional, ethical, and patient. They’ll have to be well versed in a variety of lending products, underwriting, real estate law, and the ins and outs of a number of overlapping government agencies.
It’s new times.
Too many people think that the President actually controls our economy and the fact is the President doesn’t. He can say all he wants but it’s not going to amount to much. The real change comes from congress and the senate. What we are seeing in our industry is capitalism and the free market.
What will happen to mortgage companies in the new lending world? Many of them will continue to go out of business, particularly those that have tried to get BIG and have thus created massive overhead headaches. The brokers that have remained small and have built strong relationships with their customers will survive. Their overhead is low and they will be able to evolve their business models and adapt to the changes in the industry.
My prediction is that there will be a few core mortgage brokerages out there that are still in business…the rest will be gone.
The CMBS lending market is completely broken with banks unwilling to make loans because commerical real estate assets are decreasing in value. I dont see a return to normalicy for several year. This is going to be a brutal time. I wish I could be more positive