Too Big To Fail

Too Big To Fail

Today, EverBank announced that it will shutter its wholesale broker lending business and intensify its efforts through retail lending offices and consumer-direct and correspondent channels. The move will see it close wholesale lending regional operation centers in Dallas, Sacramento and Jacksonville, and eliminate around 150 positions nationwide.  This is inline with majority of major banks including Chase, Citi Bank, Wells Fargo, Bank of America who have all shut down their Broker Wholesale channels in an effort to take complete control of the lending industry.

We had seen the writing on the wall more than 2 years ago when I decided not to renew my NMLS license which was the national campaign to license Loan Officers. In concert with the National license requirement for Loan officers was a massive lobbying effort by major lenders who wanted to shift the blame for poor underwriting decision they had made to Wholesale broker.   After all, this practice has now become the great American Business tradition where it’s simpler to blame someone else for all the mayhem that was caused by the banks and Wells Street firms.   In fact, I bet you asked an average american to tell you what caused the collapse of the Housing Market in 2007 and the recession that followed, you might hear as many answers as the folks included in the survey.  

The bottom is that with most major banks now eliminating the Wholesale channels; consumer will have less options to get loans.   They have no choice but to visit their local branch of Wells Fargo, Chase, Citi and Bank of America for their residential loans.  During the boom times, banks needed the Wholesale Chanel to market the crappy subprime loans and now that there is no market for such loans, why not ditch the Wholesale channel all together.  

These large back are doing huge disservice to consumers since they can easily control pricing and availability of financing option for residential loans.  Today, loan officers have become gophers for big banks where the banks are the one’s who determine the fee a loan officer can charge on a loan.   Today, the banks are the one’s who have massive influence on the inventory and price of foreclosure-bound homes.   In fact, we receive daily reports from Loan Officers who have to raise a White flag when they are unable to compete with rates from too big to fail banks!!

And that’s NOT how efficient markets are created.  What do you think about the role of big banks in Real Estate ?! 

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