Big Banks Seek To Corner The Mortgage Market

The Mega-Banks' media spin was successful in laying all the blame of the mortgage crisis on the mortgage brokers. As public opinion shunned mortgage brokers, it embraced the mega-bankers. This strategy of the big banks demonizing the mortgage brokers won't stop until they run them all out of business.

It is indeed rare to hear a media story or an industry professional say something nice about mortgage brokers.

Heck, I'd settle for a story that was simply accurate!

Mortgage Brokers Marginalized

One of the biggest over-reactions politicians will have to the mortgage crisis is sweeping State and Federal legislation putting truly unreasonable restrictions on mortgage brokers... restrictions the banks will never see!

It's happened in my State of Colorado. What use to be a State too lax in regulating mortgage brokers has now gone overboard coming out with a new requirement every couple of months. The first regulation was the background checks and the surety bonds. Then came the O&E insurance and testing requirements all designed supposedly to "protect the public" when in reality it's just another way to consolidate the mortgage market in the hands of just a few mega-banks.

All of this bad press and regulatory red-tape has pushed thousands of good folks out of the business and marginalized the reputations of those that remain.

Mortgage Market Dominated By Five Banks

Paul Muolo writes,

"We can all sleep again, knowing that the big boys are stable, and together control 67% of the mortgage market in terms of receivables on first and second liens. Here's how the servicing numbers shake out in terms of market share: Bank of America (21.68%), Wells Fargo (17.65%), Chase Home Finance (15.09%), CitiMortgage (8.49%) and Residential Capital LLC (4.14%).

Now for the bad news: the top five control 67% of the residential servicing market, which means in my book most of these firms are "too big too fail" just like Fannie and Freddie were. Think about it for a second: what if something goes wrong with Bank of America, which now services $2 trillion in home mortgages for American consumers? I'm not saying Bank of America is in danger financially but we've created a financial system - for better or worse - where too much risk is in the hands of too few. There's something wrong with that."

Did you catch that?

The top five banks now control almost 70% of the mortgage servicing market...and it's not over!

Putting the blame on mortgage brokers for the mortgage crisis tells me they have their eye on dominating the retail side of the market as well.

Will Mega-Banks Take Over Retail Too?

Paul is a smart guy and wrote one of the best books on the mortgage crisis available called Chain of Blame...if you really want to know who caused the crisis...don't read media stories...read that book.

Paul's contention we are creating another "too big to fail" problem is well taken, but I'll go one further. The devastation to the mortgage broker side of the industry is real and if the battle for the retail mortgage market is lost to a meg-bank propaganda campaign, it's the consumer who will suffer most.

If we let these mega-banks "win", the cost of getting a mortgage will skyrocket.

Law makers and reporters should be watchful not to be turned into a dupe for the banking industry.

At one time mortgage brokers originated 70% of all first mortgage applications, but the continuous hatch job the banks perpetrated through the media and State legislators is having the desired effect. Mortgage originations are now 60% in favor of banks... a big switch in just a few years.

I am not saying that mortgage brokers did not deserve the bad press. Many of them did... but certainly not all. Of course, it's not easy for the average mortgage consumer to tell the difference between "good guys" ands "bad guys" when it comes to mortgage brokers. We can help on that front. We instruct people finding ethical, professional mortgage brokers every day with our website, articles, and reviews.

Consumers have to pay attention to the bankersè¢'' motives as they digest their media messages. Without this discerning ear, there is a distinct possibility these mega- banks could create a è¢''bank onlyè¢'' mortgage market.

Gosh, I hope not!

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