Mortgage Blog

Too Big To Fail?

February 18th, 2011 10:50 PM by Eric Fang

We know that in the old days(before 2011), there were
some banks who were too big to fail, and the government
did try the best to save them. And indeed the banks
were saved(I don't want to mention the name(s)).

Today, I met a mortgage industry veteran, who was a VP
of a very large mortgage broker company, and I was one
of the top originators then. And that company had hundreds
loan originators nationwide during 2008-2009, and now
most of the agents already left the company. And I heard
that the main reason for the failure was line of credits
was not managed properly during the busy times of 2009-2010.
We locked lots of the loans then, but we could not close
because we sold the loans too slow to the investors(
the normal one week turn around turn into one month).
Our clients were not happy, so were the loan originators,
and the falter of the company was overnight. And the us
goverment did not need to save them, and the company still
operates the business in two states now.

That's one of the risks to expend the business. When the
company is too big, we had better know how to manage the
big monster.

We did have a very good conversation. We did talk a lot
about the industry trend and the challenges ahead of us
for the wholesale loan originators and the possibility
or working together in the future(I am not sure whether
I want to do correspondent loans again yet).

Though there are lots of challenges ahead of us, we still
believe that we can survive since we have the trusts
from our loyal clients and friends. When we have more
business, we will still try our best to make our
clients happy to get the deal done smoothly with the
best rates on the market.

Posted in:General
Posted by Eric Fang on February 18th, 2011 10:50 PM

Right after this blog, I read an article about "Managing Counterparty Risk: Multiple Warehouse Lines Needed". The company I mentioned was indeed almost killed by the waregouse lines. Though they have two lines, but not enugh to support the business when we had the huge values of the refinance
Posted by Eric Fang on February 18th, 2011 11:04 PM



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