Banks went through a rough patch with the mortgage lending during the hey-day of no check lending. The industry had to maintain standards that the independent brokers on the street did not. This is not to say the independents were shady, most were not, but the lenders they dealt with told them not to be picky and they were not. They could also offer deals that the full service banks could not touch.

But with the credit crunch, fully qualified borrowers are heading back to the banks to get their loans. This is an older story from the Boston Globe, but it does illustrate that we are in a flight to quality and mortgage brokers that were making their income on the fringes will have to raise their game. When the borrowers are scared they are much more likely to walk into a bank with all the security that it offers than to a small office when it come time to get a loan.

“The pendulum is swinging back toward more conventional borrowing, more thorough underwriting standards, the old way of doing business,” said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association. “Banks are probably going to capture a larger piece of market share again.”
Cuff said many independent mortgage companies that specialized in subprime loans — loans to home buyers with less than stellar credit — were actually run by former bankers lured by the potential for big profits without all the regulations of traditional banking. There’s evidence their former employers may be having the last laugh.
Mortgage originations at JPMorgan Chase Bank grew 41 percent in the second quarter, to $44.1 billion from $31.2 billion for the same period in 2006, the bank reported to the Securities and Exchange Commission. via The Boston Globe.

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