can someone plz explain why having less irrational players in the market makes the mortgage business more profitable, as in below? thanks. “Relative to where the industry was two or three or four years ago, the mortgage business is a more profitable business simply because many of the irrational players in that market are no longer in business,”
jimjohn Wrote: ------------------------------------------------------- > can someone plz explain why having less irrational > players in the market makes the mortgage business > more profitable, as in below? thanks. > > > “Relative to where the industry was two or three > or four years ago, the mortgage business is a more > profitable business simply because many of the > irrational players in that market are no longer in > business,” Well I’m not 100% sure but i’m assuming it’s because since there are less players, lenders can afford to charge higher rates, the spreads are higher. The more irrational players the more margins were driven down. I think this plays with just about every asset class you see as people need a way to compensate. It used to be smaller margins more volume/leverage, now it’s higher margins lower volume/leverage. You can look at bond spreads, options IV, loan rates, etc…it seems to be across the board.
Interesting. I think LPoulin’s got it right. I should add that with fewer irrational players, mortgages may not be taking as many ridiculous risks, and therefore not losing money as often. Fewer losses = more profits, at least on a per dollar basis.
Tons of lender went bust! (less supplier), people still want to refi, called up my bank recently to see if rates are low enough to consider the refi, they quoted me close to $5K to do the refi. I tole them no. I guess $5K in closing cost if pretty profitable for banks.