I’ve been spending some time speaking to those with different viewpoints on the impacts of Dodd-Frank legislation.
Impacts?
Are there actually impacts of Dodd-Frank on the housing market?
Of course.
The legislation directly impacts underwriting, disclosures, etc. with mortgages, but I didn’t give it that much thought at the time it was passed in mid-2010- Frankly, the housing market had begun to pick up in NYC and it wasn’t quite clear what its impact would be, if any.
Mortgage lending in NYC remains based on a large downpayment, usually 20% or more.
Underwriting since 2008 has precluded taking more debt than that, in the markets in which I work.
And lending has been a pain here for a long time.
Not the darlings of the mortgage world anymore
Further, predatory lending doesn’t seem to be an issue here.
Buyers know what they are doing, and coop boards ensure the same.
You can read some of the Dodd-Frank legislation here.
Fast forward to 2012.
Over the last few months, different banks have stopped allowing mortgage brokers to sell their products.
They are taking their residential business in-house, generally speaking.
If what I’m hearing is correct, the liability for mortgage brokers’ promises falls on banks- so this becomes a protection issue.
Citibank, then Chase, Bank of America, HSBC, then Wells Fargo.
Mortgage brokers would seemingly go out of business in New York City.
How do they put together loans when there are not banks willing to let them do so?
It’s not so simple, of course.
Rather than suffer the fate of no one to buy their loans, many of these mortgage brokers and their teams have moved under the auspices, or umbrella, of a bank.
Friends have moved to Citi, Sterling National Bank, Wells, HSBC, etc.
In doing so, they can then, in many cases, again take advantage of products offered not only by their bank, but other banks as well, as correspondent lenders.
It is not exactly clear how this limits liability, except that banks accept the underwriting of these other banks.
Some will have more money to lend, some will have less.
But there is lots of money chasing limited returns – and much of it ends up in the housing markets.
In the end, smaller, community banks and private lenders will likely pick up the slack of lending where larger banks don’t fill the role.
Outside of NYC, it seems that mortgage brokers will have tons of opportunities to make lots of money.
In New York City, where buyers are nearly all with great credit, lots of assets and income, it becomes about the best rate- and it may be that mortgage brokers get beat up here.
We shall see.
Government regulation ends up being very disruptive here, but the rates and the loans, wherever they come from, continue to be very exciting!
While it lasts, which most say is another 12-18 months, many, many buyers and those refinancing are taking advantage.
It is pushing the market volume as much as can be done with limited inventory.
Your mortgage broker may be with a new bank, or a new group- and this is likely why.