Are Mortgage Brokers Being Phased Out?

[Corey Dutton]

Over the last few years, the number of mortgage brokers in the United States has shrunk drastically as new regulations have made it more difficult to do business. According to the National Association of Mortgage Brokers President Don Frommeyer, the Association had about 27,000 members in 2006. Today it’s down to about 5,100!

Frommeyer said that a lot of brokers moved under banks when the SAFE Act came into effect. This is because bank loan officers don’t have the same licensing requirements as mortgage brokers. “As a broker, you’re limited on your compensation. … But when you’re a correspondent or a banker you don’t have to have any set compensation with the lender,” he said. “It’s more profitable and advantageous to do that for some companies.”

Bottom line, mortgage brokers have been forced to get creative in recent years due to increased regulation. This has been both good and bad. There were a lot of crimes that occurred pre-crisis that were perpetuated by unscrupulous brokers that put consumers into bad loans or in homes they couldn’t afford. However, overregulation has made it difficult for the U.S. consumer to get any kind of loan, mortgage or otherwise. Government meddling is always short-sighted and creates lots of losers and few winners. New regulations have made it impossible for mortgage brokers to compete and have empowered monstrous financial institutions even more. What is your opinion on this controversial topic?