Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

New mortgage broker rules thin the herd

By Scott N. Miller, Vail Daily

Published June 27, 2008 at 10:12 a.m.
Updated June 27, 2008 at 10:12 a.m.

Text size  

More Real Estate

More stories »

EAGLE COUNTY — Jay Gould thinks he’s the first mortgage broker in the county to pass his state licensing exam. Everyone else has until the end of the year.

In the wake of the national mortgage business meltdown, Colorado has new laws governing the business. Those laws include registration and background checks, and by Dec. 31 of this year, everyone who wants to be in the mortgage business in the state must hold a license proving he or she has passed a class for brokers.

“This is going to weed out a lot of people,” said Gould, owner of Vail Valley Mortgage. “Some people were weeded out when they got fingerprinted.”

Jimmy Brenner has been in the Vail Valley mortgage business for 35 years. As a member of a couple of state mortgage associations, he said he’s been pushing for tighter requirements for about 25 years now.

“It was overdue,” Brenner said. “It’s unfortunate that economic events have really driven it now.”

In Gypsum, Jamie Sanchez, owner of Integrity Mortgage of the Rockies, said he has numerous friends in the Denver area who have gotten out of the mortgage business. He’s almost lost count. But he, too, said the new regulations are important.

Fewer brokers, fewer products

The people who stay in the business have fewer resources for home loans.

Brenner said a software program his company uses to find funding sources used to list more than 200 different companies. Fewer than 50 show up now, he said.

In the past several months, mortgage companies have disappeared overnight.

“Some of those were like ‘AAAcme Mortgage’ to get in the Yellow Pages,” Brenner said. “But those guys have all gone away.”

Along with mortgage companies, a lot of easy mortgages have gone away, too.

Vertice, a division of Wachovia Bank’s mortgage business Wednesday issued a release that it was shutting down its “stated income” loans.

During the real estate boom of the past few years, “stated income,” a type of loan that didn’t require documentation like tax returns, put a lot of people into houses. But a lot of those people ended up with mortgages they couldn’t afford.

The loss of those mortgages “has crippled us,” Sanchez said.

“It’s gotten a lot harder for self-employed people,” he said. “They don’t show a lot of stated income on their tax returns. Now you have to have that.”

The mortgage business today looks a lot like it did years ago, when people had to provide documentation including tax returns, monthly payment schedules and so on.

“Most people in the valley can do it,” Gould said. “They just haven’t had to prove these things; a year ago, they didn’t have to. But I don’t see many people who can’t qualify.”

So where’s the money?

Brenner has been in the business long enough to see periods of tight money and easy money. Money has gotten tight again, something of an irony, since real estate values have either dropped or stabilized in a lot of the country.

“A lot of those loans wouldn’t be as risky now,” Brenner said.

When the real estate boom was raging, with home values going up 12, 14 or 15 percent a year, was when banks should have tightened up, Brenner said. Instead, brokers were writing mortgages for 105 percent of a home’s value.

“Now it’s hard to get a 95 percent loan,” he said.

But the brokers interviewed for this story all said money is out there, for those who qualify.

“If your credit, income and assets are good, you can get a mortgage,” Brenner said. “But if there’s weakness there, it’s harder.”

And a lot of brokers are still pretty busy, despite the current local real estate slowdown.

“We’re pretty busy,” Gould said. “Rates are still pretty good.”

Brenner, whose time in the business has given him access to loan sources a lot of brokers can’t get, agreed.

“There are good loans for good borrowers out there,” he said.

And, Gould said, action in the local real estate market seems to be picking up.

“We’ve picked up more purchase action lately,” he said. “It was slow for a while.”

But even when the real estate market picks up, Sanchez thinks the credit market isn’t finished tightening standards.

“I think we’re in for another year, at least, of tightening,” Sanchez said.

Scott N. Miller can be reached at smiller@vaildaily.com