Mortgage brokers are becoming a vanishing breed

Ken Blaudow has felt the pain of the housing finance industry turmoil.

The owner of Indy Mortgage in Indianapolis had 85 employees originating home loans in 2003. Now he has three and is about to give up his leased office in Castleton and move his company into two bedrooms of his house.

“It’s drastically down,” he said of his industry. “And there are a lot of funky new rules.”

At least Blaudow’s still around.

Most of the mortgage brokers that seemed to populate every office building and commercial street in Indianapolis and many other cities just five years ago have vanished.

The number of Indiana mortgage brokers and loan originators licensed by the state has plunged 73 percent since 2005, from 4,008 to 1,080, according to the secretary of state’s office.

Brokers and loan originators find lenders for people seeking a mortgage on a new home purchase and charge a fee for that service.

With a sharply reduced membership base, the trade group that represented them, the Indiana Association of Mortgage Brokers, is gone.

“The industry most assuredly has been thinned out,” said Douglas Brown, an Indianapolis attorney and the trade group’s former general counsel.

Much of the decline has been due to the implosion of the housing sector since 2007. Prices and sales plunged during the recession. Foreclosures hit record highs almost everywhere.

As government rushed in to respond to the crisis, caused in part by overselling of risky mortgages by brokers who got rich on exorbitant fees, regulations on the industry multiplied.

Indiana and other states in the past two years began requiring brokers to pass licensing exams and undergo background checks. A criminal record, even a past bankruptcy, can now prevent someone from writing a mortgage. If states don’t already do it, a federal law coming in January will require licensing exams and criminal background checks nationally.

Many of the sometimes-exotic products that independent brokers used to push — jumbo loans, subprime mortgages — also have been restricted or banned.

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Mortgage brokers are becoming a vanishing breed