More bad news for mortgage brokers: National Mortgage News reports the PMI Group of San Francisco will no longer insure mortgages brought to them by "third-party originators" unless they have a warehouse line of credit. In other words, no brokers, but mortgage banks are OK.

Mortgage brokers put consumers together with lenders. They don't fund loans and therefore don't need credit lines. Mortgage banks work with brokers or directly with consumers. Pure mortgage banks fund loans using borrowed money (warehouse lines), and then sell the loans. Traditional banks (Bank of America, Wells Fargo etc.) fund loans against deposits and may keep or sell the loans.

Companies like PMI provide insurance to protect lenders or investors against default by the homeowner. Home shoppers who borrower more than 80% of the price of the home they are buying must get mortgage insurance.

Brokers are definitely under attack. But the problem isn't brokers. There are some bad brokers, yes. More importantly, there were lenders willing to work with any broker, especially when loan volumes began to decline. As for subprime and stated-income loans, lenders made the loans and Wall Street funded them, so blaming brokers is nonsense.

My thinking is lenders will continue to work with high-volume brokers with a good track record of loans not going into delinquency (or not any more than the industry) and without any funny business.

Your thoughts and feedback on this topic are greatly appreciated. Please feel free to post your comments.

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