MI Companies Putting The Clamps Down!

Everyone in the mortgage world is feeling the pinch these days. During the past several years 100% programs and other risky products were abundant and we are all feeling the affects. Mortgage Insurance Companies (MI) were right in the middle of this. They are the ones who insured loans over 80% loan to value.! Safe to say business was very good for them. Well not so much anymore and they have of course scaled back. This is what is necessary, but the changes keep coming. Recently a disturbing trend is taking shape. Two major MI companies (PMI and AG) have decided to not insure loans made by mortgage brokers! This is a huge move that will have the broker industry reeling. I know first hand small broker's that are scrambling and re-evaluating their business plans. If all of the MI companies follow suit, many will be forced to shut down. We at Flat Branch Mortgage are lucky that we recently switched over to be mortgage bankers as opposed to brokers. This way the changes will not affect us in the same way. However, if we hadn't made this move we would be in the same boat as all of the other brokers. Not a very fun seat to be in that is for sure! It remains to be seen "if" the others will follow suit and if this is a temporary decision or a permanent one. It seems to me that this is a drastic move and a bit of an over reaction. I feel sorry for the small businesses that do business the right way that are being caught up in this mess. It seems there would be a way to rate the quality of business each broker does. If the quality is poor, then cut them off! A blanket policy is harsh. While it may be good in the short term for us (reduced competition), I feel it is bad for he consumer. We have already seen how well the "BIG BANKS" run their businesses. If all the small brokers are cut off who will be their competition. Who will keep them honest and competitive in the marketplace? This is very important in my eyes. If they are competing against themselves they can continue to take the bailout money, hoard the cash, and set the market themselves. Doesn't seem like a recipe for success to me. This is just one of the many industry changes taking place behind the scenes. Be sure to check back for updates as it will be interesting to see how this plays out.

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