Although no one has exact numbers, the fallout from the mortgage market morass will be just as devastating for the brokerage sector as it has been for the rest of the industry, according to a long-time analyst who keeps tabs on that part of the business.

"We think the number of brokerages will decrease to 35,000 nationwide by mid-2008," according to Tom LaMalfa, a partner in the Columbia, Md.-based research and consulting firm, Wholesale Access. LaMalfa made his prediction in a speech earlier this month to the Illinois Association of Mortgage Brokers. The talk was re-printed in full in the industry newsletter, the "Holm Mortgage Finance Report." If the consultant's dire forecast proves correct, it means nearly a third of the brokerage business will disappear, leaving the sector essentially where it was in 2000, when Wholesale Access counted only 35,000 firms.

In its most recent survey of the sector, Wholesale Access counted 53,000 brokerage firms at the start of the year. And that was down from 54,000 in 2005, when the mortgage meltdown began.

The company counts a firm as being in business if someone answers the phone or does at least one loan a year. Many companies are one-person operations, but the typical firm has seven employees -- one manager, five loan officers and a processor.

If businesses are going to be hit hard, their workforce is going to be hit even harder, according to LaMalfa, who predicted that the number of brokerage loan officers will drop from 300,000 to 175,000 or so.

He also told the Illinois group that there will be a 50 percent reduction in the number of correspondent lenders, from about 2,000 to 1,000. The number of wholesalers also is likely to be cut in half, from about 300 to 150.

But he expects the number of "mega-wholesalers" to grow, from about five today to 12 or 15 as the share of originations "gets redistributed."

"Given this general environment, survival should be everyone's goal," said LaMalfa, who has been an industry analyst and observer for more than 30 years.

To stay afloat, he suggested that brokers switch to purchase money mortgages that fall within the conforming loan limit, currently $417,000.

"In 2008, mortgage brokering won't pay the bills unless at least 70 percent of your production" is in those products, the consultant.

Brokers "who have been doing 80 percent refis and subprime should probably consider a career change," he said. "If someone doesn't want to operate in the agency space, there's no market for their services."

While those who blame brokers for the current debacle probably believe the business is only reaping what it sowed, LaMalfa laid responsibility for the fallout squarely with Wall Street, which he said has now "pillaged MortgageLand" for the third time in 20 years.

Gordon Gekko, the movie character played by Michael Douglas in the Oliver Stone film, "Wall Street" -- and who popularized the phrase "greed is good" -- "would be proud of the way Wall Street (has) hosed investors," he told the IAMB meeting.

"The increasing rate of delinquency and default (is) evidence that investors ... both here and worldwide got shafted by the guys from Wall Street," he said.

Published: September 19, 2007

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.