Mortgage brokers trying to hang on

Mortgage brokers scramble to upgrade their image.

ASSOCIATED PRESS

Mortgage brokers who haven’t fled or been forced out of the industry are in survival mode.

They’re coping with little or no business as the economy slows, accusations that they’re to blame for the mortgage meltdown, stricter lending standards and the threat of new regulations. Efforts to persuade would-be customers that they’re ethical and helpful abound.

“The general consensus is we’re all holding on by our fingernails,” says Melbourne, Fla.-based mortgage broker Ritch Workman, whose 21-employee company closed an estimated $35 million worth of home loans in 2007, compared with $100 million in 2005, when the market was at its peak.

Since April 2006, more than 26,000 mortgage brokers have been put out of work, reducing the number of brokers to 122,500 in November, according to the latest federal statistics. A Labor Department report due today is likely to show that the field’s ranks continued to shrink in December.

There are still about 400,000 workers in the mortgage industry, but 130,000 of those jobs will disappear before the mortgage industry work force is aligned with demand for its service, estimates analyst Paul Miller of Arlington, Va.-based investment bank Friedman, Billings, Ramsey & Co.

Job losses will continue because it’ll take time for the Federal Reserve’s latest flurry of interest-rate cuts to spur would-be homebuyers into action. Borrowers who are in the market remain skeptical of mortgage brokers.

Ben Kreisher, 86, of East Goshen, Pa., is struggling to keep up with the home loan he refinanced with a local mortgage broker nearly two years ago. He says he would have been better off with a reverse mortgage, commonly used by retirees. “No one even mentioned that [option] to us,” he said.

These are the kinds of complaints that have spurred state and federal officials to propose tighter regulations.

Last month, the Fed proposed regulations that would restrict yield-spread premiums, fees that brokers earn from lenders for steering customers toward what critics say are loans with higher-than-necessary rates. The Fed wants the premiums disclosed and agreed to by borrowers in advance of committing to a mortgage.

To combat a shady public image, many mortgage brokers are using promises of ethical behavior as a marketing tool through groups such as the Upfront Mortgage Brokers Association, whose members pledge not to saddle borrowers with unexpected charges.

With business down 50 percent last year, Tucson, Ariz.-based mortgage broker Mike Jones has posted a motto on his Web site that includes this guarantee: “If I mess up, I ’fess up and I fix it.”