Why Mortgage Brokers Are Concerned About HUD Delegating FHA Approvals To Lenders

In a series of Mortgagee letters released by the FHA in September 2009, one particular announcement has caused major concern among mortgage brokers and small correspondent lenders about their ability to continue offering FHA mortgage loans due to the new licensing structure mandated by HUD.

Tony Gallegos address the main talking points and generally fears, as well as gives his own personal opinions about the future relationships between large lenders, brokers and FHA mortgages.

Message From Tony:

Over the last week, I have been bombarded with questions and concerns regarding the recent announcement by the FHA delegating authority to approved direct endorsement (DE) lenders to approve mortgage brokers to originate FHA loans. To answer these questions, I produced this brief video.

via mortgagecicerone.com

About The Guy In The Video:

Tony Gallegos, aka The Mortgage Cicerone, has spent the past 22 years building, leading and managing large scale enterprise FHA/VA production entities, most recently as Vice-President and National Retail Government Production Risk Manager at Wells Fargo Home Mortgage (the nations #1 government lender).

With experience as a personal loan officer (412 funded loans in one year), and a senior executive at a mega bank ($25 Billion origination volume),Tony is qualified to tell you the difference between average and superstar mortgage professionals.

Currently, Tony and his business partners started Cognicorp FHA/VA Training Solutions…thus providing rare but powerful evidence it is actually possible for an individual to re-emerge from the corporate collective, even after full assimilation has occurred.

Article Bullets:

The FHA has decided to allow large wholesalers, or Direct Endorsement (DE) underwriters to approve which brokers they’d be willing to do business with.

Previously, it was the FHA that directly approved brokers for FHA business. Now, as of January 1, 2010, the large banks will be the ones policing the FHA approved lenders and brokers.

Industry Concerns:

Mega lenders will create a monopoly and force the brokers out of FHA lending by throwing them under the regulatory bus.

Since mega lenders will be the ones commissioned to approve smaller brokers and lenders for FHA financing, many believe that they will set training, reserve requirement and adequate staffing guidelines that most of the smaller companies won’t be able to live up to.

The large lenders will implement severe credit overlays on their broker and correspondant affiliates, which in turn will create a non-competitive environment that will eventually squeeze out any perceived competition to the large lenders’ retail divisions.

Tony’s Thoughts:

1. This could happen in the short-term, but not a viable business plan for the long-term.

2. There isn’t a massive large bank cartel planning to collapse the lending world.

3. FHA Commissioner, David Stevens, has stated several times that he wants to create and encourage competition in the marketplace.

4. Mega lenders can gain tremendous market share by partnering with brokers and correspondant lenders for the purpose of building their government servicing portfolio, which is where the real money is for mega lenders.

5. NAMB needs to become relevant again and build a strong loby. *Jim Pair, current NAMB President is working hard on this.

6. Regulatory controls are coming about – regardless of how much we cry about it.

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