Slowdown may make banks love brokers: AMBL

While all the talk currently is about banks trying to reduce the costs of dealing with mortgage brokers, it may actually pay them to deal with brokers when the housing market contracts, according to Brent David, general manager at aggregator AMBL.

Monday, October 11th 2004, 2:12AM

"The lenders don’t pay brokers unless they give them business," David argues.

Not having to pay for brokers’ overheads will surely provide banks with a cashflow benefit.

"It is my opinion that in a contracting market, the mortgage broking channel will become a much more attractive channel for the lenders. After all, they will still have all of their fixed costs in maintaining the retail branch network and in particular mobile mortgage managers in a market that is contracting," he says.

Rather than restrict their dealings with brokers, the banks are more likely to review the profitability of maintaining mobile mortgage managers and could well start laying them off, particularly if the slowdown turns out to be a lengthy one.

"The first thing they will look to do if they’re not increasing profits will be to reduce expenses. Those brokers that are established in the industry will still be here when the next positive property cycle begins. Will all of the current mobile mortgage managers still be here ? I wonder !"

AMBL currently has between 140 and 150 brokers signed up for its services which now include a proprietary computer system. David says the group settled $1.2 billion in mortgages in calendar 2003 and he expects that will rise to about $1.56 billion this year.

He doubts the banks will want to stop dealing with AMBL brokers, claiming that their application to approvals and approvals to settlement ratios are well above industry averages.

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