We are getting into a nuclear winter scenario for Mortgage brokers.
As originations and profitability plummet, the industry will see a significant contraction. Those left standing will not want to be in the business with all the new regulation that will very likely be imposed.
Guys, we are still at the very beginning of all this. The tidal wave of ARM resets are just starting. Depending on who you believe up to 1-1.5 Trillion are still due for resets thru 2009. ARM resets are just part of the story.
We’ll continue to see a severe credit cruch as this unfolds. The initial hits were in subprime, then Alt-A, now recently spreading into Prime Jumbos. Even with a great credit score you are paying a significantly higher rate on your jumbo. With no one buying Mortgage backed securities or derivative instruments, Lenders will be forced to hold on to loans. Many of these lenders who are already in serious financial situation will further reduce originations. Many will be going bankrupt. Only the folks with the very best credit and significant down payments will even quality for a mortgage. Net result is fewer qualified buyers.
There is a downward self-reinforcing sprial here.
Fewer qualified buyers, more inventory, lower prices, more underwater owners, more REOs, tightening credit, lower prices, more inventory, etc….
