Sign of the times... Community Mortgage closes it doors

Community Mortgage has closed it doors on Hood Avenue. The firm's owner Dan Higgins decided closing the business was his best response to current market conditions.

"I owned Community Mortgage Services for 11 years, but I could see the handwriting on the wall and wanted to leave early enough that there would still be a chance at employment in the field. The best thing for me to do was to just shut it down," said Higgins.

The reasons for the decision involved more than just the slowdown of the housing market.

"There were really a lot of factors in the decision. Back in the early summer when things really started slowing down, consumers started to migrate to the banks and away from the mortgage brokers. I actually predicted well ahead of time that the government would step in and start regulating the brokers very aggressively on both a state and federal level," said Higgins, who now is working for Bank of Bend in the mortgage department.

"The new changes would and, as it turned out, made it very difficult for brokers not only to stay in business but also made it difficult to even want to stay in business because of the liabilities and responsibilities that they put on us," he said.

It is not that all the changes were necessarily bad.

"Some of the changes were actually good. Senate Bill 3915, for example, requires that brokers or loan origination officers for banks need to take continuing education hours at the federal level and state level. We also have to register at the federal level so that our number follows us. This makes it difficult for someone to just move to a different state if they create a problem and start over again," said Higgins.

However, some of the new regulations make it very difficult for independent brokers.

"They want to put the liability back on the broker if he doesn't provide the lowest loan rate and the consumer later defaults. It is very difficult for brokers who have access to hundreds of loans and each of the rates changes as many as three times per day. If the broker makes a loan and the consumer later defaults and the loan was perhaps an eighth of a percent higher than who ever was the lowest that day, which might only amount to a $20 difference in payment, the broker is liable for the default," said Higgins.

Another factor that complicates life for the independent broker has also emerged.

"They want to get rid of Yield Spread Premiums which is also called YSP. This is the way that a lot of banks and brokers get paid. For example, if the loan is at five-and-a-half percent and I sell it at six percent, there is a premium that becomes a commission or can be used for other things. I sometimes use this as a tool to pay closing costs, as sometimes consumers don't have the cash to pay the closing costs for a refinance or a first home, and this can be a good tool in the right circumstances," said Higgins.

The housing slowdown is affecting all areas of the mortgage industry, according to Higgins.

"Don't get me wrong. There is still a lot of good business out there, but volumes are way off in all areas: new sales; refinance; equity management; construction - everything is down. I think the media is somewhat to blame for the market as it has made buyers overly cautious, not that the market wasn't overpriced, but the media has really focused the attention on it, and that made a big difference," he said.