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Robert Nusgart: As lenders pull back, consumers lose options

Amid all off the hoopla about falling mortgage interest rates that has spawned another refinance boom for homeowners comes news that two of the nation’s largest lenders are backing away from the mortgage industry.

This month, Bank of America announced that it was laying off hundreds of workers in its retail mortgage operation. That move comes on the heels of the company announcing in September that it is exiting the correspondent lending business to concentrate on its own branch-to-consumer business.

Many mortgage banking entities that had BOA’s product line as a part of its investor pool will now have to place their customers with other investors.

Meanwhile, MetLife Home Loans is looking for a new home. MetLife Inc., the insurance giant, announced Wednesday that it was looking for a suitor to purchase its residential mortgage business. The company announced in the summer that it was looking to sell its banking operation but would keep the mortgage platform. Now it has added a for sale sign on its mortgage operations.

For Bank of America customers it’s too early to see if the layoff will affect how it handles existing accounts and originations. The bank has been under siege ever since it acquired Countrywide Financial and all of its toxic mortgages, and it seems as if it has tired of the headaches that the mortgage industry is experiencing.

Apparently, the same could be said for MetLife Home Loans. The company got into the mortgage business three years ago when it acquired First Horizon Home Loans. But the constant turmoil and sagging housing market apparently influenced its decision to exit.

And who could blame the company for that.

Dismal housing forecast

On Wednesday, the Mortgage Bankers Association came out with its dismal housing forecast for 2012. The MBA expects to see mortgage originations fall from an estimated $1.2 trillion in 2011 to $900 billion in 2012. The trade group stated in a release that despite continuing low rates, refinances will drop off and purchase money will increase only slightly.

Economic woes in Europe could still harm the U.S. economy, said Jay Brinkmann, the MBA’s chief economist and senior vice president for research and education.

But he hedged his outlook by saying: “We also see a path for the economy that could lead to above-trend growth in 2012. Housing inventory and shadow inventory is declining steadily. A more robust housing market recovery could spur faster overall growth.

“The odds of this scenario, however, are low and we think the most likely outcome is another year of frustratingly slow economic growth and stubbornly high unemployment.”

The MBA’s forecast also made these points:

-Fixed mortgage rates are expected to remain low by historical standards, finishing 2011 at around a 4.5 percent average for the year, falling slightly to 4.4 percent for 2012 and climbing back up to 4.9 by 2013.

-Home purchase loans will likely decrease in 2011 from 2010, totaling $400 billion from an estimated $472 billion in 2010. Yet with another sluggish year expected, the MBA said 2012 purchase originations will increase slightly to around $412 billion.

As the economy picks up a little more speed in 2013 and home sales and home prices also start to increase, purchase originations are expected to increase to $770 billion for the year.

-Despite lower mortgage rates in the final quarter of this year, refinance originations will be lower than in 2010, falling to $783 billion from an estimated $1.1 trillion, because there were fewer eligible borrowers left to refinance.

What to do?

The MBA expects this “burnout” to continue through 2012 and 2013, even as rates remain below 5 percent, with refinance originations falling steadily to $495 billion and then $332 billion.

So what does the consumer take away from this?

It wouldn’t be surprising to see continuing streamlining in the mortgage platforms of big banks as they wrestle with declining originations, foreclosures, short sales and ongoing litigation over past practices.

If so, then choices for consumers will narrow and customer service will wane.

Therefore, those shopping for a mortgage should investigate which companies are supporting mortgage operations and which are in retreat. It is another in a series of new days in lending and the consumer has to be awake with wide eyes to understand what is happening in the business.

Robert Nusgart is a loan officer with Mortgage Master Inc., which is associated with The Strata Group in Baltimore. He can be reached at 443-632-0858 or by email at rnusgart@mortgagemasterinc.com. Visit his website at www.RobertNusgart.com for the latest mortgage and financial news.