Local Mortgage Firms Shrink Because Of Housing Woes
Despite massive downsizing, brokers see bright side
At a glance, things in the Central Massachusetts home loan industry look dismal. Many mortgage brokers have gone out of business, and many of those that remain have slashed their staff numbers by well over 50 percent. But some in the business say the current situation is more silver lining than black cloud.
"I'm actually kind of happy," said Christopher Tremblay, CEO of Mortgage Dreams LLC in Worcester, which has reduced its staff from about 50 down to 15.
Tremblay and other mortgage executives say it has been obvious for years that many brokers and lenders were acting unethically, with strong support from banks and other lenders. They said both increased caution on the part of lenders and regulations now being passed at the federal and state level should help deal with that problem.
"What I hope we can do is keep the undesirable people from coming in and out of our industry," said Jim Picciotto, president of Framingham-based Patriot Funding, which has laid off about two-thirds of its employees in the past two years.
"You could have put a monkey behind a desk and they could have got somebody financed," he said.
Even within his own company, Tremblay said, the people he has lost were largely the least experienced, and his revenues have dropped far less than might be expected from such dramatic downsizing. He said he and other core staff members have been working longer hours, picking up the slack for those who have left, and also taking on the business of other companies that have disappeared. The 70-hour weeks mean less time with his family, Tremblay said, but the hard work reflects the responsibility brokers take on when they help homeowners get loans worth hundreds of thousands of dollars.
"They're holding people's dreams in their hand," he said.
But even longer working hours only go so far. Christopher Iosua of The Mortgage Connection in Fitchburg said his staff is putting in an extra eight to 10 hours a week and finding plenty of prospective customers, but often the funding to accommodate them is simply not there. With banks and other lenders now very skittish about borrowers with less-than-stellar credit histories, he said, there is a serious lack of liquidity in the market. Iosua, who radically downsized his mortgage business to concentrate on other business ventures, including a martini bar in Fitchburg, said he expects the contraction to continue for six months or so.
"After that," he said, "I foresee a little bit of moderation, a little getting back to making sound loans for people that are good credit risks."
A Delicate Balance
Picciotto said he hopes that's the case, and not just for the sake of his bottom line. As bad as the reckless lending over the past few years may have been, he said, it was partly a result of good federal policies intended to make home ownership possible for more people. He said he hopes new regulation won't thwart that goal.
"Overall the legislators, both federally and statewide, are trying to do a good job to put barriers of entry in the future for the mortgage industry, for people to get in, which I'm hugely in favor of," he said. "However I hope they don't go overboard on other things and handcuff the industry, especially liquidity-wise."
The barriers to entry are already starting to do their job. David Cotney, chief operating officer at the Massachusetts Division of Banks, said many recent applicants for broker licenses have not met newly instated requirements, which include auditing or reviewing their financial statements and having a minimum $25,000 net worth and a flat $75,000 bond.
Yet new mortgage brokers are still popping up. While only 86 percent of the state's brokers renewed their licenses this spring - a somewhat lower rate than most years, according to Cotney - the total number of license holders is now back up to where it was in January, about 1,500. Cotney said that may reflect a proliferation of smaller mortgage operations.
"I think what has happened is probably as companies have gone out of business or have laid off workers that many of those are the ones that we're seeing who are trying to start new companies," he said.
How well the new companies will do is anyone's guess, but Iosua said there is some reason to be at least a little hopeful about the housing market's short-term prospects. He said first-time home-buyers with good credit who may have put off buying a home during the market bubble are starting to take advantage of dropping prices.
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