The year 2010 will go down for our small business as better than a year ago – much better – but not among our best. As a small residential and commercial mortgage broker, the second half of 2010 saved the year with the dip in residential mortgage rates spurring some unanticipated refinance business. At the same time, the commercial real estate sector did start to thaw, but lenders are re-entering the market treading very lightly.
The observation we would walk away with is that lending, overall, is still suffering from an aversion to risk. Financial institutions are taking few chances with lending and rightly so. Given the unprecedented level of scrutiny not only coming from regulators, these institutions have been beaten up by the media, by consumers, by Congress and the executive branch, and by their own borrowers. Bank examiners are being pressured to avert the next crisis and that tends to make any lender cautious about making anything short of the pristine loan – higher credit scores, higher down payment, more certainty with appraisals are the observations of my husband.
The commercial real estate mortgage market used to contain a large participation on the part of Wall Street. Firms like Merrill Lynch and Goldman Sachs were participants, buying loans and re-packaging the loans for the asset-backed securities market. Just a few have re-entered the market and commercial real estate remains on the radar of a number of the regional banks – analysts waiting for that “shoe to drop” according to my husband. He noted that he’s got a few more lenders to send deals to now, but that it is like “pulling teeth” to get them to lend to anyone unless the borrower almost does not seem to need the money.
Interest rates made a turn for the worse from a broker’s standpoint late in the year – refinance business dried up and there is typically a slowdown in the residential real estate market around the holidays. At the same time, transactions are down during the winter months here in the Midwest anyway. A little bit of commercial activity – mostly inquiries – makes us hopeful for the first quarter of 2011.
The year will also mark one where we continued to make significant financial cuts. We got our office space rent reduced, cut phone lines, sold office furniture on Craig’s List, and cut out all of the perks we previously offered the brokers in the office. And, my husband and his business partner parted ways.
But, when we sit back and look to years like 2005 and 2006 – boom years – and then beginning in late 2007 through 2009 – we are grateful to still be in business. The next hurdle will be in regulations coming from the Dodd-Frank Bill and the new Bureau of Consumer Financial Protection. Mortgage brokers are good for competition in the lending business – and we stand by that into 2011.