Over the last twelve months the number of brokers has shrunk tremendously as sub-prime lender after sub-prime lender has imploded. Even mainstream brokers who didn’t get as caught up in sub-prime have closed down at a tremendous rate.
That trend will continue over the next two years due to a wave of legislation aimed at weeding the bad apples out of the mortgage industry, to mix metaphors. The Housing and Economic Recovery Act’s SAFE statute requires compliance with national licensing minimums and states are free to enact tougher standards.
The effects of this change are already being felt. States like Michigan and Kentucky have done away with their exemptions and added loan officer licensing requirements to the existing company licensing requirements.
The net effect will be to reduce the number of brokers in the industry as the cost of compliance goes up and as the minimum thresholds to do business increase.
Take Wisconsin, for example. To apply for a license in Wisconsin requires a mortgage company to have at least $250,000 liquid assets at all times. This threshold keeps out all but the well-capitalized and stable financial firms.
Over the next two years many more states will enact requirements such as Wisconsin’s and the number of brokers will plummet as the borderline brokers find easier careers.