State’s mortgage industry dramatically contracts amid home foreclosure crisis

By Buck Wargo

Tuesday, Dec. 9, 2008 | 2 a.m.

Nevada’s housing recession is taking a stunning toll on the state’s mortgage banking and brokerage industry.

The state reported a drop of more than 55 percent among mortgage agents, brokers and bankers in the past two years.

“It is simply a function of the marketplace that as credit has been constricted and loans are not as available there is less of a market for people who make or broker loans,” said Joe Waltuch, Nevada Mortgage Lending Division commissioner.

The biggest drop came among mortgage agents, whose ranks have thinned almost 70 percent. The division reported last week that the state had 3,589 active licensed mortgage agents as of Dec. 1, a decline from 11,686 in October 2006 and 8,295 at the end of October 2007.

The number of mortgage brokers has been whittled down to 490 as of Dec. 1. It stood at 1,097 in October 2006 and 869 in October 2007.

There were 131 mortgage bankers as of Dec. 1, down from 306 in October 2006 and 236 in October 2007.

The number of mortgage agents seems to have stabilized, although Waltuch said there could be another drop in the number of mortgage bankers when licenses are renewed this month.

“I can tell you some big players in this market are going to be closing or consolidating their branches,” Waltuch said without naming any names.

Mortgage bankers usually operate under a national bank charter rather than be licensed under state law, Waltuch said. That allows them to offer uniform programs across the country and save in state license fees.

Deborah Priebe, branch manager of U.S. Mortgage Corp., said more companies will consolidate or drop out of the market. It’s back to basics for companies. The strong will survive, she said, and the same is true for mortgage agents.

“I think a lot more people are falling out of the mortgage industry because of the simple fact the industry is becoming more stringent in its requirements,” said Priebe, who predicted those familiar with old-school mortgages, such as Federal Housing Administration loans, will be getting the business.

Those who entered the business since Dec. 31, 2004, will be required to take a 100-question test on law and ethics. Many people with less experience won’t be able to pass that test because they don’t have the knowledge, Priebe said. “I think that 3,500 number is going to dwindle some more.”

The drop-off in licensees is bad news for an agency whose revenue is the fees they pay, which is down 65 percent since fall 2007. Waltuch said only five of 17 vacant positions budgeted for his office have been filled because of a hiring freeze.

Waltuch predicted it would be a year before there is an increase in the number of licensees, which will follow any improvement in the housing market.

Some former mortgage agents have gotten involved in housing-related scams, Waltuch said. He noted that there have been more than 30 complaints dealing with such activity in the past several weeks.

Many mortgage agents who let their licenses lapse have become foreclosure consulting and loan modification specialists, but some are scamming people, he said. Some foreclosure consultants, for example, are telling distressed homeowners how they can help prevent their home from being foreclosed. They ask the homeowner to pay them an upfront fee, which is a violation of state law, and have the client give them their house payment to negotiate with lenders. These consultants are pocketing the house payments instead of forwarding them to lenders, he said.

Some loan modifiers are collecting fees to help homeowners change their mortgage payments, but in some cases the consultant does little or nothing for the money and disappears, he said.

A longer version of this story appears in this week’s In Business Las Vegas, a sister publication of the Sun.