The Future For Mortgage Brokers - Part 4

The independent mortgage broker industry in Australia is still young and should prosper again after the credit crunch. The industry is yet to fall under a national regulatory body in order to give it credibility, however this is planned. When the industry becomes regulated in a similar fashion to the FSA in the UK and the turmoil in the global financial markets is sorted out, mortgage brokers in Australia should once again experience a boom.

Mortgage Brokers in the USA

Nowhere has the credit crunch hit harder than in the United States of America. Ghost towns have emerged in once prosperous areas due to the high number of properties which are now abandoned that were previously financed with sub prime mortgages. Rather than going through the stress of repossession, home owners who could no longer afford their monthly mortgage payments simply walked away from their properties, leaving them empty. Lenders would then be forced to repossess the derelict houses.

When this phenomenon happened en masse within small neighbourhoods the repossessed properties became worthless as the local real estate markets collapsed. This has left some parts of towns and cities in the USA as ghost towns. It is an event that has never happened before and can be squarely blamed on the credit crunch.

Prior to 2007 the mortgage broking industry in the USA was booming. Brokers were closing millions of home loans each year and enjoyed a large portion of the total number of loans approved nationwide. Surprisingly, given the magnitude of the intermediary industry and the importance of mortgage products to home owners, there was little regulation of the broking profession. Any regulation that did exist only covered certain areas as the regulatory model was state driven rather than federal.

But no one thought to question the lack of regulation because the property market was booming and everyone was making money. The old saying - if it ain't broke don't fix it - seemed an appropriate theme for the late 1990s and early 2000s. What is apparent now with the benefit of hindsight is that the industry was actually broken and did need fixing.

Fast forward to the present day and mortgage brokers in many states around the US are not only being ejected from the industry but are also being sent to prison. Massive frauds have been uncovered in the wake of the first wave of the credit crunch and it appears that some individual brokers have defrauded lenders and investors out of millions of dollars.

In addition to these headline-grabbing problems many brokers also face a new reality in which there are fewer products to sell to clients and therefore fewer deals being closed. This in turn deprives the brokers of income and had subsequently forced many advisers out of the business. Many who have remained in the profession are struggling along, closing enough sales to stay afloat, and awaiting a time when the credit market will flow freely once again. It would be difficult to find a mortgage broker anywhere in the USA who claims that he or she is not struggling to stay afloat since the credit market froze in 2007.